The Shanghai-based dairy producer may spend 500 million yuan to increase its fresh-milk production to 1.2 million metric tons this year, Chairwoman Wang Jiafen said.

Bright, a partner of French dairy giant Group Danone, was the market leader for seven consecutive years running up to 2003, when it was overtaken by Inner Mongolia Yili Industrial Group Company Ltd.

The company's image was damaged in 2005, when one of its factories was found reproducing and selling storage milk. The company has since lost its dominance to newcomers, including Yili and Mengniu Dairy Co.

China's milk industry has expanded dramatically as a result of rising affluence and changing consumer preferences. According to a research by management consultancy McKinsey, China's dairy industry second-largest in Asia is set to double to nearly $20 billion by 2010.

Bright hopes its expanded capacity will help it to serve more consumers with its established sales network, Wang said.

Wang had earlier said Bright would "fight back" this year against its competitors. Apart from output expansion, it will focus on star products and start building strategic cooperation with major retailers.

Bright has been struggling to restore its dominant status. The company regrouped in 2006 and Danone became its second-largest shareholder, with a 20.01 percent stake.

But in December, Danone announced it would form a joint venture with Mengniu Dairy Co in yogurt production.

"Danone has limited ability to operate in China by itself, so it needs to use a platform like Bright," Wang said, "and it will need more platforms to maximize its profit."

The company said it might form joint ventures with other foreign producers, including Japan's Meiji Dairies Corp.