Some small and medium-sized dairy producers on the mainland are set to disappear after the central government issued a clear policy encouraging consolidation in the industry, experts and analysts say.
Hailed as the first specific policy guideline for the industry's development, the statement from the National Development and Reform Commission revealed earlier this month that it aimed to groom a group of big milk makers with annual sales reaching 2 billion yuan (HK$2.26 billion) each by encouraging mergers, acquisitions and restructuring among industry players.
It also lifted the entrance criteria for newcomers and disclosed that small and energy-wasteful operators would be closed down.
'The industry is growing fast. But there are also many problems such as over-production capacity, repeated construction and unstable raw material supply,' the statement said.
Yang Lei, an analyst with ABN Amro, said the policy demonstrated the government's determination to enhance the industry's competitiveness and a sure way of doing so in the medium to long term would be through consolidation.
Wang Dingmian, an official with the China Dairy Association, forecast that a large number of small and medium-sized dairies were likely to disappear within a decade.
