In new move, Feihe to acquire goat milk firm

Milk powders in a supermarket in Xuchang, Henan province. Geng Guoqing / for China Daily

Heilongjiang Feihe Dairy Co Ltd, a subsidiary of Feihe International Inc, will acquire a 70 percent stake in Shaanxi Guanshan Dairy Industry Co Ltd for about 300 million yuan ($49 million), extending its portfolio into the goat milk powder business as it targets high-end consumers, a company executive said.

The deal, which is being finalized, is seen as an early step in the government's drive to rationalize the sector. Specific policies for the industry are expected to be released by the end of this month.

Industry analyst Song Liang said the deal, involving the goat milk industry, could help Feihe, which is pursuing more consumers in first- and second-tier cities.

SGDI will offer Feihe a way to grab share in a market with huge growth potential.

Leng Youbin, chairman of Feihe Dairy, said on Wednesday that the goat milk powder market, valued at 3 billion yuan annually, is expected to grow into an industry worth 10 to 20 billion yuan within 10 years.

The market for cows' milk is worth nearly 60 billion yuan.

The move will allow Feihe to expand its product lines and capture more high-end customers.

Prices for goat milk powder are often twice those of cow milk powder.

Goat milk is also a good substitute for those who are allergic to cow's milk, Leng added.

Feihe will retain the Guanshan brand. It's expected to replicate its cow milk production system and transform SGDI's goat farm operations from the household level into large-scale production.

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