Hutchison unit enters China's premium infant milk market

BEIJING - Hutchison China MediTech Ltd, the pharmaceutical arm of Hutchison Whampoa Ltd owned by billionaire Li Ka-shing, announced on Tuesday that it will enter the Chinese infant-formula milk powder market through cooperation with Hain Celestial Group Inc, a leading US natural and organic products company.

By launching Earth's Best and Zhi Ling Tong co-branded organic infant formula in China, the companies are targeting the country's premium market through a 50-50 joint venture, Hutchison Hain Organic Holdings Ltd.

The new product has obtained an organic certificate from the China Organic Food Certification Center and will be produced in Switzerland, according to Hutchison China MediTech.

"We will focus mainly on the premium infant-formula market in China," said Christian Hogg, chief executive officer of Hutchison Hain Organic.

"In the next five years, the company will strive to gain 2 percent market share, which equals some 800 million yuan ($123 million)," Hogg was quoted as saying by the China Business News on Tuesday.

According to Hogg, China's infant-formula market is projected to reach around 44 billion yuan this year.

Chen Lianfang, a senior dairy industry analyst at Beijing Orient Agribusiness Consultant Ltd, said that the country sees 15 million newborn infants every year, thus the market potential of baby milk powder is huge.

After the melamine-tainted milk powder scandal that swept the Chinese dairy industry in 2008, there is a growing trend for milk powder makers, both from home and abroad, to focus on China's premium infant-formula market.

"Because Chinese parents now are more concerned about the safety of baby milk powder, lots of companies started entering the premium market," said Tang Zhiqing, an industry analyst at Shanghai Yiyan Business Consulting Company.

For example, Hangzhou Wahaha Group Co Ltd, one of China's largest beverage manufacturers, launched its premium infant formula last year with an annual production capacity of 100,000 tons.

Currently, global brands, including Mead Johnson, Dumex and Wyeth, account for more than 85 percent of China's premium milk powder market, according to industry analysts.

Hutchison China MediTech reported a loss of $6.9 million last year, while its revenue rose 21 percent year-on-year to $134.5 million, according to the company's 2010 annual financial report.

The New York-based Hain Celestial Group said in early May that the company's net income hit $16.8 million in the third quarter of 2011, more than six times the net income for the same period last year.

China Daily

(China Daily 05/26/2011 page15)