China Mengniu to acquire Bellamy’s for US$1bn as it eyes organic infant formula and Southeast Asia, Australia growth

16 Sep 2019 --- China Mengniu Dairy has entered into an agreement to acquire organic infant formula producer Bellamy’s Australia for US$1 billion. The proposed acquisition will enable China Mengniu – China’s second-largest dairy producer – to capture the huge potential in organic formula and baby food categories in China and Southeast Asia, as well as fuel growth in the Australian market.

The Hong Kong-based firm offered AUS$13.25 (US$9) per share on Monday September 16 for Bellamy’s – a sizable 59 percent premium to the stock’s last closing price. The Launceston, Tasmania-based company’s board, unanimously recommended the offer, Bloomberg reports.

The move from China Mengniu comes almost a decade after the country’s melamine scandal. The country’s largest dairy cooperative, along with some other dairy firms, was implicated in a milk powder adulteration scandal, when melamine was found in its formulations and caused kidney damage in approximately 300,000 babies, as well as six fatalities. The country is still taking steps to boost its local baby formula industry following this confidence-shaking event.

China Mengniu now hopes to strengthen its position in organic infant formula – one of the largest and fastest-growing segments in the Chinese dairy market.

Competition for consumer attention between dairies is heated, but organic infant formula is clearly enjoying significantly faster growth and higher margins compared to the overall formula market, according to China Mengniu. The stronger demand for organic products is driven by consumer perceptions of higher quality and safety standards of organic ingredients.

Bellamy’s has a comprehensive range of “premium and super-premium” organic baby milk formula and baby food products, which enjoys higher margins than China Mengniu’s existing business segments, the Chinese company shares in a statement. Bellamys positioning, product and channel mix are highly complementary to China Mengniu’s existing formula operations and hence will enable the group to expand its product range and customer base in both China and overseas markets.

Innova Market Insights data also notes a rise in parents and caregivers seeking organic products for their little ones. According to the market researcher, the top positioning for infant nutrition launches tracked globally is No Additives/Preservatives, followed by Organic, No Added Sugar and, lastly, Brain Health.

“Across all age groups for children, natural and organic foods are attracting increasing interest, which is driving R&D. Parents have similar concerns about health areas such as brain development and protection as their children grow up. We are starting to see more interest in healthy food options – low added sugar, natural and nutrient-dense,” Angela Rowan, NZMP Marketing Manager, Paediatric Nutrition, tells NutritionInsight.

By Laxmi Haigh

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