When China Mengniu Diary confirmed its will to bid for a stake in the French firm Yoplait, one was allowed to think the dairy industry in China has grown adult.
The biggest nation’s diary company, established only in 1999, is trying to buy a stake of Yoplait, founded in France in 1964 and now the world’s second largest milk products brand. In the formal bidding, Mengniu will face the sector’s giants, including Nestlé, as competitors. No doubt, it is a sign of the development of the dairy industry in China.
It was almost non existent until few decades ago. Milk and cheese did not belong to the traditional Chinese diet, but to the population living on nomadic habits to its north-western boundaries. Dairies are a process of livestock, while Chinese built their economy and culture on agricultural farming. It goes back on centuries, based on different uses of the land. Nevertheless, even in China diehard habits can change. Exposure to different diets, less rigidity in keeping traditions, increased income, made possible the introduction of new products. Great progress was made under the assumption that milk is good for your bones and for your health.
Very quickly China became the third biggest milk producer in the world, after India and Usa. No wonder, the industrial concentration is located in Inner Mongolia. Milk and dairy products are now a common sight in restaurants, canteens, supermarkets. There is a fierce competition among foreign brands and local companies to control a massive market. Consumption growth has been stunninh – 20% growth year-on-year – before the melamine scandal that hit China. In 2008 six children were killed and 300,000 fell ill when the toxic industrial chemical was added to the milk. The consequences were huge, with dramatic drop in consumption and loss of credibility of the industry. The justice was severe in punishing the culprits. In addition the Government recently passed a nutrition labelling law to restore customers’ confidence. Finally, dairy companies have engaged themselves in reaching higher standards of quality. The efforts paid off and today a big sales rebound is taking place. Industry consolidation and consistent profits have created new local giants, like China Mengniu Dairy and Yili Group. The b id for Yoplait, surprising as it might be, is just the logical next step of a long process, Chinese style, we should get accustomed to.