CCM: Overcapacity risk looming up in infant formula segment 02-29-2016

On 26 January, Yashili signed a MOU with Ausnutria, to sell its Guangzhou infant formula plant. In view of the successive sales of plants and the price war in China, CCM believes that the risk of overcapacity in infant formula segment is looming up.

Source: Internet


On 26 January, Yashili International Holdings Ltd. (Yashili) announced that its Scient International Group Limited (Scient) had signed a MOU with Ausnutria Dairy (China) Co., Ltd. (Ausnutria), to sell Scient (China) Infant Nutrition Co., Ltd.’s all rights (also known as Guangzhou plant).

"Yashili has many plants at home and abroad. Despite advanced production facilities and top level management, it is hard to give full play to ‘intensiveness’. Also, it has excess capacity”, according to an insider in Yashili.

Previously, Yashili had 4 production bases in Chaozhou City (Guangdong Province), Guangzhou City (Guangdong Province), Qiqihar City (Heilongjiang Province) and Shuozhou City (Shanxi Province). In 2015, however, it sold its Qiqihar plant and now the Guangzhou plant. This probably can be attributed to its New Zealand plant. In November 2015, Yashili put its NZ plant into operation. Capacity given at 52,000 t/a, this plant is capable to satisfy 50% of demand from Yashili. “It is inevitable that Yashili will eliminate its backward capacity in home market after launching new plants abroad”, commented dairy expert Lei Yongjun.



According to the National Bureau of Statistics, China had 16.6 million neonates in 2015, down by 320,000 YoY. “In China, the production capacity of infant formula, including foreign enterprises’ in China and Chinese enterprises’ abroad, totals about 1.5 million t/a. However, the consumption is only about 600,000-700,000 tonnes, expected to only rise to 800,000 tonnes after the two-child policy is issued universally”, analysed dairy expert Song Liang.

In addition, the rise of cross-border E-commerce business has enabled consumers to choose foreign-developed infant formulas on their own, which has pulled down the consumption of domestic-made infant formula and has increased the domestic inventory. Meanwhile, many big brands, involved in declining demand and great inventory pressure, have down-regulated their prices. All of this indicates that the risk of overcapacity is looming up.

Yashili’s de-capacity movement is only an epitome of the domestic trend. Synutra International Inc. (Synutra), which is now constructing its French plant, has already sold its Zhangjiakou plant (in Hebei Province) quietly and has only Qingdao plant for infant formula production now. “We are worried about the domestic infant formula market”, said CFO of Synutra: “In the next two years, domestic producers will expand the capacity of processing and packaging infant formula by 460,000 t/a. However, the consumption capacity is very limited, unable to consume the newly established production capacity. The overcapacity will be worsened”.

Now dairy companies including Mengniu, Yili, Biostime, Beingmate, Bright Dairy, New Hope Dairy, Ausnutria and Synutra, are constructing plants overseas, in a move to attract domestic consumers with “imported infant formula”. “The domestic-developed brands, with fairly large market shares, have 1/4-1/3 of plants suspended”, said Song Liang.
Regarding measures to cope with the overcapacity in infant formula segment, Song Liang continued:

  • Enterprises should carry out M&A domestically, to optimise the production capacity structure
  • Government should encourage enterprises to ‘go out’ for overseas acquisition, by means of policies, loan and tax preference. From this, enterprises will obtain quality raw milk and advanced technology
  • Government departments and associations should promote the “help the poor and the outlying districts” infant formula plan, by using the “student milk” scheme for reference


About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.


For more information about CCM, please visit or get in touch with us directly by or calling +86-20-37616606.


Tag: Yashili, Ausnutria, infant formula

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