China Mengniu Dairy Co Ltd, the country's largest dairy company by market value, said on Monday that it will acquire a 51 percent stake of Junlebao Dairy Co Ltd, China's fourth-largest yogurt maker, for 469.2 million yuan (US$71 million).

By combining product research and marketing resources with Junlebao, Mengniu expects to enter the world's top 10 dairy ranking and achieve a 50 billion yuan turnover in the next five years, said Yang Wenjun, Mengniu's chief executive officer.

Mengniu, ranked 16th in the world's top 20 dairy list, had a turnover of 25.7 billion yuan in 2009, according to an annual report, called Global Dairy Companies, by Dutch financial group Rabobank in June.

Junlebao, founded in 1995 and based in Shijiazhuang, Hebei Province, owns nine subsidiaries across China and had sales revenue of 1.3 billion yuan in 2009.

Yang said this merger is a win-win situation for China's dairy industry and consumers.

"Through the integration of the capital, the merger will accelerate the pace of national brands becoming bigger, stronger and more competitive on the world stage. Additionally, we will be able to provide diverse, high quality products for consumers," he said.

Industry experts regard this merger as a model of brand integration for China's dairy industry.

Song Kungang, chairman of the China Dairy Industry Association, said integration is the most important means of enhancing the competitiveness of China's dairy industry and is also the key to success for most dairy giants overseas.

In 2009, the Ministry of Industry and Information Technology and the National Development and Reform Commission jointly issued a policy that encouraged dairy and food industries to integrate resources and increase industry mergers and cooperation.

The draft version of the 12th Five-Year Plan (2011-2015) also underlines the importance of developing the dairy industry in terms of quality, instead of quantity.

"The merger of Mengniu and Junlebao follows the trend in industry development. It is a good example and reference point for other dairy companies," Song said.

Increased cooperation in production, management, and marketing between these two enterprises can benefit their brands' credibility in China and can also help promote their competitiveness in China and abroad, he added.

(China Daily November 23, 2010)