CHINA – Chinese dairy producers may face problems in 2019 as the number of births in the country is expected to keep dropping while more foreign rivals enter the market amid government moves to encourage imports, ramping up pressure on domestic players.
In the latest sign of demographic pressures on China’s dairy industry, US investment bank Goldman Sachs cut the price target on Inner Mongolia Yili Industrial Group from 29 yuan ($4.28) to 28.3 yuan a share and that of Mengniu Dairy from $HK24.5 ($3.12) to $HK24.2.
It also trimmed the target on milk powder manufacturer H&H Group from $HK66.2 to $HK65.1.
China’s newborn population is estimated to have fallen 7 – 13 percent year-on-year to between 15 million and 16 million in 2018, according to a report issued by Gaohua Securities in January. In 2017, 17.23 million newborns were added to China’s population, according to the National Bureau of Statistics.
The decline has prompted Goldman Sachs to estimate that sales of baby formula this year will be flat with last year or perhaps post a 0.5 percent slight increase, financial news website caixin.com reported over the weekend. Sales are estimated to drop 2 percent year-on-year in 2020.
This year “will see the end of the ‘golden era’ for China’s dairy industry, which has boomed since 2014,” Song Liang, a Beijing-based expert on the dairy industry, told the Global Times.