Safety Scandals Give Foreign Dairies a Boost

With the safety of dairy products, especially infant formula, constantly under question in China, foreign brands are finding an opening into the China market. From Reuters:

The latest foreign bet comes from Danish-Swedish dairy group Arla, which said on Friday it would buy what amounts to a 6 percent stake in Yili’s main competitor, China Mengniu Dairy Co, from private equity fund Hopu for 1.7 billion Danish crowns ($289 million). The deal lifted Mengniu shares by 7 percent on Monday.

“If you have an international brand, then there’s a premium in the market, because food safety is a concern,” said Kevin Bellamy, dairy analyst at Rabobank in the Netherlands.

For some global milk producers, finding new markets is also crucial as they consolidate and expand production faster than their traditional, and mature, milk markets can grow.

Milk and formula safety became a deep concern for Chinese parents after a 2008 scandal in which at least six babies died and 300,000 were sickened from drinking milk formula contaminated with melamine, a chemical used in fertilizer and plastic.

Earlier this year, Nestle bought out two infant formula brands which are popular in China. Read more about milk contamination and food safety in China, via CDT.