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Meiji to stop selling milk powder

2013-10-25 10:39 Global Times Web Editor: qindexing

Meiji Co Ltd, a Japanese dairy producer, announced Thursday that it will temporarily cease selling milk powder in China due to fierce competition and increasing costs.

Intense competition in the Chinese market has resulted in increased costs for Meiji from importing milk from Australia, the Shanghai branch of Meiji announced on its website, noting the company will temporarily stop selling four kinds of milk powder in China after the current inventory has sold out.

According to the product introduction on Meiji Shanghai's website and its online shop, the four kinds of milk powder are the only milk powder types Meiji sells in China now.

Meiji's retreat from the Chinese milk powder market will not have much of an impact on the market because it only has a tiny market share, Chen Lianfang, an analyst from Beijing Orient Agribusiness Consultant Ltd, told the Global Times Thursday.

Compared with other competitors, Meiji does not invest much on product promotion and Chinese customers favor milk powder from Europe, Australia and New Zealand rather than Asian brands, Chen said.

Before the earthquake in Japan in 2012, Meiji was one of the top 10 foreign milk powder brands in the Chinese market, Song Liang, an independent dairy industry analyst, told the Global Times Thursday. But after the earthquake, Meiji's milk powder sold in Japan was recalled due to nuclear radiation, which was followed by it dropping out of the top 10 in China.

The National Development and Reform Commission conducted an anti-monopoly investigation into the milk powder industry in July and August, news portal netease.com reported in August. Several foreign brands were fined because of manipulating prices illegally, and while Meiji was also on the list, it was not penalized due to actively cooperating with the investigation, the report said.

The gross profit margin of foreign infant formula milk powder in foreign markets is about 20 percent, Chen said, but the margins in the Chinese market could be higher than 60 percent.

Song stressed that recent regulation moves, such as improving industry entry thresholds, are not intended as discrimination against foreign brands but a bid to build a healthy and fair market and improve Chinese customers' trust in milk powder products.

The Ministry of Industry and Information Technology (MIIT) has submitted the plan for merging and reorganizing domestic infant formula milk powder producers to the State Council, according to the MIIT's website.

The Chinese market is too big to give up so Meiji has said its selling cessation is temporary, Song said.

"We only stop selling milk powder in China but other products will not be influenced such as yogurt and cream." Meiji Shanghai told the Global Times Thursday in a statement.

Meiji Shanghai also said the company will continue to provide after-sale service for milk powder customers, including nutrition counseling.

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