Home Milk Giant to Buy KraftA major domestic milk producer is set to buy a Beijing-based milk factory of US diary giant Kraft, according to an industrial official.Beijing Sanyuan Foods Co Ltd. will purchase Beijing Kraft Food Corp Ltd. with an acquisition agreement expected to be clinched later this week. Sanyuan, which already owns a 15 per cent stake in Beijing Kraft, will hold a full stake in the company after the purchase, said Wang Baohuai, vice-chairman of the China Milk Industry Association. "Sanyuan will be allowed to use the brand of Kraft and will pay according to sales," added Wang. Sanyuan is a major milk manufacturer in China. The company produced 25 tons of milk last year. Kraft International, the foreign investor in Beijing Kraft, currently holds an 85 per cent share in the company. It is a household brand for milk products in the United States, within the Philip Morris Group. The acquisition has caused a stir in China because it is unusual that a foreign brand name is purchased by a Chinese enterprise. Last year, Tsingtao Beer also made headlines when it acquired 75 per cent of shares in a Carlsburg beer factory in Shanghai worth about 150 million (US$18.1 million). Experts said brand purchasing provides an easy way for foreign investors to enter the Chinese market and speed up its localization. Insiders said some foreign investors put the famous brands on the shelf after they bought them because it made it easier to kick out the major rivals in the Chinese market. Since 1993, China has been promoting its own brand names, with more than 9,000 consumer brands introduced. But more than half of them were sold to foreign investors, according to a report from the State Bureau of Quality and Technical Supervision. Official statistics indicate more than 30 of the top 50 domestic electric appliance makers are controlled by foreign investors. The lessons taught many domestic enterprises to be aware of the value of their brands and to make use of brand names. Some experts considered Sanyuan's acquisition as a good example of a Chinese enterprise using a foreign brand name. Yet, "it is unwise to draw the conclusion that Kraft will be phased out of the Chinese market," said Wang. Wang attributed Kraft's unsatisfactory performance in China to its failure to maximize its advantages. "Kraft is expert at making cheese, but it turned to yogurt in China. It is hard to compete with local makers because of their low prices and large marketing channels," said Wang. "The acquisition will add 100,000 tons annual production capacity to Sanyuan and drag the company a step closer to its target of becoming a leader in the domestic milk market," said Xing Chunhua, president of Sanyuan. Xing also said Sanyuan will accept all the staff from Beijing Kraft if they are willing to stay. But he refused to disclose how much Sanyuan will pay for the acquisition. Source: China Daily |
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