Chinese baby food and care products provider Biostime International Holdings Ltd announced it has agreed to a joint venture with baby diaper manufacturer Hangzhou Coco Healthcare Co, a move that signals Biostime's expansion into the domestic mid to low-end market.
Under the agreement, the two companies will jointly invest in five baby diaper production lines and manufacture, sell, import and export baby diapers.
"Amid fierce competition, Biostime was forced to invest in the upstream business so that it can better target the lower end of the market and cover mostly the third- or even fourth-tier cities," said Song Liang, a dairy analyst at the Distribution Productivity Promotion Center of China Commerce.
To respond to the country's call for industry consolidation, Hong Kong-based Biostime announced earlier this month it had purchased Changsha Yingke, a licensed domestic infant formula producer, for 350 million yuan ($57.4 million), which is expected to give Biostime an additional 30,000 to 50,000 metric tons annual production capacity of baby milk and shorten its supply times.
In August 2013, Biostime was charged a heavy fine of about 163 million yuan or 55 percent of its half-year profits, for its price-fixing practices in violation of China's Anti-Trust Law.
To boost the image of the brands of scandal-plagued domestic infant formula products and restore consumer confidence, the industry regulator submitted a plan to the State Council for consolidation of the milk powder industry in order to improve control quality.
