SHANGHAI – A plan by Pfizer Inc to shed its nutrition unit, which includes the major infant formula milk maker Wyeth LLC, could shake up the market for this baby product, industry analysts said.
Last week, Pfizer, the world’s largest drugmaker, said it would shed its animal health and nutrition divisions to better position itself as a leading bio-pharmaceutical company.
The two divisions brought in revenues of $5.5 billion last year. The nutrition business, acquired through the purchase of Wyeth in 2009 and specializing in baby food and formula, contributed $1.9 billion.
Media reports said that the formula producer Nestle SA and the Danone Group, the owner of Dumex, are seeking to buy the nutrition unit from Pfizer. Both companies declined to comment when contacted by China Daily.
“Dumex and Nestle currently have large market shares for formula milk in China. It is obvious that Danone or Nestle will have about a 20 percent market share, occupying a leading place in China’s formula milk market, if one of them buys Wyeth from Pfizer,” said Yan Qiang, a consultant from Beijing-based Adfaith Management Consulting Inc.
“Such a dominant position will also mean more influence on infant formula prices in the long term,” Yan said.
Statistics from the National Commercial Information Center in 2010 showed that Dumex has about a 17 percent share of the market in formula milk, followed by Nestle, with about 11 percent. Wyeth has about 5 percent.
With about 15 million newborns in China each year, there is great potential in the infant formula milk market, industry experts said.
Previous reports have said China’s infant formula milk market could reach 44 billion yuan ($6.8 billion) this year.
Following scandals over milk safety, Chinese parents have increasingly turned to imported diary products. But these families are facing price pressure, with many imported infant formula milk product prices up 10 percent in the past two weeks.
“Chinese parents now are more concerned about the safety of baby milk powder. They would rather pay a higher price for ‘premium’ products, which is creating big opportunities for producers entering the premium market,” said Chen Xiang, an industry analyst in Shanghai.
Global brands, including Nestle, Dumex, Wyeth and numerous others, account for more than 80 percent of the premium infant formula market in China.
“Following the melamine-tainted milk powder scandal in 2008, domestic and foreign formula makers started to focus on the premium infant-formula market in China,” she said.
Last year, Hangzhou Wahaha Group Co Ltd said it would expand into the infant formula milk powder field with a high-end product called Aidisheng (the Chinese pronunciation of Edison), with an annual production capacity of 100,000 tons.
“The specific details of Pfizer’s options have yet to be decided. These could include full or partial separation of each of these businesses, such as through a spin-off, sale or other transaction,” Xi Qing, Pfizer communications director, told China Daily.
Source: China Daily