M. Laridan, consultant at Daxue Consulting, about milk powder industry in China

A sample of the Interview of M. Laridan, consultant at Daxue Research, for the NYT, on milk powder industry in China.

Do you think the government's goals are attainable by 2015 and 2018?

According to the plan, by the end of 2015, 10 large-scale infant formula companies with more than $ 2 billion annual sales should be formed. The top 10 enterprises in formula will account for 65% of the market share. By the end of 2018, 3 to 5 of this company will reach annual sales of $ 5 billion. And the concentration rate of the market share will be 80%. It creates a feeling that China tends to create a monopoly in this industry.

However, the problem is that in China, the majority of Chinese cow are small farmers. There are no common standard of the feed and dairy breeds of cows. Cows` diary in different regions may vary a lot. Thus, the quality of milk may be different especially when a large formula enterprise sets up with milk sourcing base nationwide. What is more, the plan announced by theMinistry of Industry and Information Technology mainly focus on the manufacturing process, not the sourcing process. It cannot ease consumers` mistrust on domestic formula companies. The key factor of consumers` preference for foreign formula brands the milk source, which may not be totally copied by domestic companies even these companies absorb foreign investment and technology.

Whatsoever, it does not mean that goal cannot be achieved. There`s no doubt that 2 largest milk companies in China, Mengniu and Yili will make much efforts to follow the plan. The influence of these two companies makes it easy for them to attract good source and advanced technology if they will set up a company specialized in milk powder manufacturing.

Even though merger and acquisition could be finished in one year, the deadline may be a bit tense for the establishment of good-quality milk sourcing system of top 10 companies. Milk companies with good reputation will find business opportunities because apart from consumers who have preference of foreign formula, there are still large amount of population who cannot afford foreign formula. However, the awareness that formula from abroad is of higher hygienic standard and more nutritious cannot be changed in one year.