China to grant formula makers 30 bln yuan in reshuffle

The Chinese government is expected to grant five of the country's baby formula makers as much as 30 billion yuan in financial aid in the largest industry reshuffle to shore up tarnished home companies amid food scandals roiling foreign brands.

The Ministry of Industry and Information Technology (MIIT), China's industry watchdog, has finished drawing up a detailed plan to prompt merges and restructuring among the country's over 120 baby formula makers, China Business Journal quoted a source familiar with the situation as saying.

Five baby formula makers including Yili, Mengniu, Feihe, Wandashan and Treasure of Plateau are among the first to be benefited from hefty government financial assistance, according to the plan.

The estimated 30billion yuan aid is likely to come in the form of government special funds, the National Development Bank loans and favorable tax policies, analysts said.

The plan will be unveiled at a press conference on September 28th and names of the first batch of companies getting government support will also be officially announced.

Those five winners of government support will also launch new high-end brands then in an effort to win back Chinese comsumers' confidence in home brands.

Chinese media earlier reported the number of Chinese baby formula companies will be cut to around 50 by the year of 2018, according to the plan,which also looks for 3-5 large players each with an annual revenue exceeding 5 billion yuan ($818million). which makes the list a little bit surprising.

Yili is China's largest baby formula maker by sales in 2012, representing 7.8 percent of the world's top baby formula market. Mengniu which has acquired Yashili in June has 4.9 percent while Feihe and Wandashan both have 1.7 percent. Market share of Treasure of Plateau is unknown.

China's leading baby formula brand Beingmate failed to make the list. Beingmate was accused of price fixing in China regulator.s sweeping anti-trust probe but was exempt from hefty financial punishments that other companies including Dannone, Mead Johnson and Abbott Laboratories faced.

The supportive move by the Chinese government came weeks after foreign brands slipped into a series of food scandals which may give consumers a relook at the country.s home brands.