Pricing crackdown sees Japanese baby formula firm retreat from China
China is a magnet for foreign infant milk formula makers, with the €9bn market expected to double by 2017. However, foreign firms have come under pressure amid a crackdown on pricing and as authorities look to consolidate the fragmented dairy sector.
Meiji said that it could no longer stay in the market due to intensifying competition as well as the rising cost of its imported milk source from Australia.
All of its four formula brands in China use Australian milk.
“Under the harsh environment, continuing to use Australian milk source is causing a severe impact on cost and revenue,” its Shanghai-based dairy unit said in a statement on its website.
In August, China’s National Development and Reform Commission fined a group of mostly foreign milk powder producers, including Danone, a total of €80m for price-fixing.
Meiji, Nestle, and Zhejiang Beingmate Scientific Technology Industry and Trade Co were also implicated, but escaped punishment for co-operating with the investigation.
Meiji cut prices on all its products by as much as 7% at the time.
Meanwhile, China has emphasised its support for home-grown firms, with local media saying the government will give 30 billion yuan (€3.6bn) to Chinese milk powder makers to help them compete with international rivals.
A Meiji official in Shanghai said the company would continue with its confectionery business in China and would sell milk and yoghurt products by the end of the year.
— Reuters
