Kraft selling Chinese dairy plant

U.S. giant Kraft is selling off its Beijing, China-based milk-processing plant to one of the Asian nation's biggest dairy concerns.

The agreement, between Beijing Kraft Food Corp. Ltd. and Beijing Sanyuan Foods Co. Ltd., reportedly will be finalized later this week, according to a report in the Jan. 9 edition of China Daily.

Upon completion, the deal will have Sanyuan boosting its existing 15% stake in Beijing Kraft to 100% ownership and gaining use of the Kraft brand name. The purchase also will have Sanyuan increasing its annual production capacity to 100,000 tons, pushing it toward a position as China's top dairy processor, company officials said.

Terms of the proposed transaction were not revealed. All of Beijing Kraft's employees will be asked to remain on under the new leadership, Sanyuan President Xing Chunhua said.

"Kraft is expert at making cheese, but turned to yogurt in China," Wang Baohuai, vice-chairman of the China Milk Industry Association, was quoted by the newspaper. "It is hard to compete with local makers due to their low prices and large marketing channels."

The projected sale apparently is raising eyebrows on the mainland because Chinese companies rarely buy up foreign brand names.

The deal is being viewed by certain experts as a good example of a Chinese enterprise utilizing a foreign brand name, the newspaper reported.

Since 1993, more than 9,000 Chinese-originated brand names have debuted, Xinhua News Agency said. But, greater than 50% of those monikers were purchased by foreign companies, according to a report from the State Bureau of Quality and Technical Supervision.

Edited by Gerry Clark,
Managing Editor, Dairy Network.com