New baby formula debuts in HK

Baby formula products of Junlebao Diary Co Ltd on display at an expo in Beijing, July 17, 2014. [Photo/VCG]

Junlebao Dairy Co Ltd, a leading yogurt producer in northern China, said it started selling its baby formula product in Hong Kong on Monday after two years of sales in the mainland's market.

Its Baijinzhuang baby formula will be sold in the city at the price of 176 yuan ($26.42) for each can, the same as in the mainland, the company said.

At the beginning, the formula will be sold only in pharmacies, according to Liu Senmiao, head of the company's infant formula milk powder department.

"We haven't set a goal for our sales levels in Hong Kong," Liu said.

He said Junlebao wanted to test the waters there since Hong Kong's market had so many competitive international milk powder brands.

At present, the company's milk powder only has a small slice of the mainland market.

A report by Beijing Business Today estimated total sales revenues of all milk powder in China hit 80 billion yuan last year, while Junlebao sold less than 1 billion yuan.

Analysts said barriers to entry for newcomers were higher in Hong Kong. Beijing analyst Song Liang said it was harder for a newly growing milk powder brand to compete in the more sophisticated market.

Junlebao, founded in 1995 and based in Shijiazhuang, Hebei province, owns nine factories across China and had sales of 6.5 billion yuan in 2015.

The dairy company started to make baby formula two years ago, the sales of which amounted to 11 percent of its total sales revenue last year, according to Liu.

"Though Junlebao still can't compete with other mature formula brands from home and abroad, the growth rate of its sales over the past two years is unprecedented," Liu said.

For the first six months, Junlebao baby formula brought in 550 million yuan of revenue, a 48 percent increase on the same period last year.

According to Liu, the current production capacity of Junlebao, which yielded a total of 720 million yuan last year, cannot keep up with domestic demand.

Adding to its capacity, on Monday a milk powder factory was put into operation near the company's headquarters in Shijiazhuang.

Liu said with the new factory, the production capacity of milk powder could reach 60,000 tons each year, which could expand its sales revenues substantially.