Ministry wants to stir up milk formula industry

The Ministry of Industry and Information Technology has come up with a plan for the reorganization of the infant formula industry, which aims to enhance the product quality by concentrating the best resources, according to an anonymous insider, reported China Securities Journal.

The ministry held a discussion with 127 milk powder producers on June 18 over merger and acquisition. It called on the top 10 brands, including Yili, Wandashan, and Firmus, to merge with their competitors, according to a person who attended the meeting.

Three to five infant formula manufacturers will be formed with over 500 billion yuan ($81.8 billion) in annual sales by the end of 2018 under the guidance of the ministry.

Meanwhile, the total number of infant formula suppliers will be 50, of which the top 10 companies account for 80 percent of the market.

At present there are 127 baby formula manufacturers with an annual output of 600,000 tons. Only three of them have an annual output of 30,000 tons. And the sales volume of the top ten brands stands at 18 billion yuan, accounting for 45 percent of the market.

Gao Fu, an inspector with the ministry, has admitted such a plan has been drawn up and the consolidation will start this year. He said, the first two years will be spent in forming 10 manufacturers with over 200 billion yuan in annual sales income and independent intellectual property rights, taking up over 70 percent market share.

By the end of 2015, all the manufacturers should follow the Good Manufacturing Practice of powdered infant food. The government will offer favorable tax and fiscal policies for manufacturers who meet the GMP.