Following the news that the Australian Competition & Consumer Commission (ACCC) has given the nod to China Mengniu Dairy Company Ltd (Mengniu) for the proposed acquisition of Lion Dairy & Drinks Pty Ltd (Lion D&D);

Shagun Sachdeva, Consumer Insights Analyst at GlobalData, a leading data and analytics company, offers her view:

“Mengniu Dairy was already looking for opportunities to diversify its business and expand its brand presence in the emerging markets. The transaction will allow Mengniu to enhance its presence in the Australian market and strengthen its portfolio by leveraging Lion’s longstanding brand presence and manufacturing and cold chain distribution hold across Australia. The transaction will strengthen Mengniu with a stronger foundation to excel in the Asia-Pacific (APAC) region.

“Mengniu has recently completed the US$1.5bn takeover of infant formula company Bellamy’s Australia Ltd, in line with its aggressive acquisition strategy. The series of acquisitions will create greater synergies for the group not only from the geographical footprint point of view but also from the supply chain perspective as well.

“At the same time, Lion has been trying to sell its dairy portfolio since 2018, which comprises of Big M, Pura, Dairy Farmers, Berri and Daily Juice brands. In October last year, Lion sold its specialty cheese business to Saputo Dairy Australia, with plans to focus on high-margin alcoholic beverage and premium non-alcoholic drinks in Australia and New Zealand.

“According to GlobalData, the APAC dairy & soy food sector is forecast to grow from US$128.5bn in 2018 to US$167.7bn in 2023, registering a compound annual growth rate (CAGR) of 5.5%. Milk was the largest category in the APAC dairy & soy food sector, followed by drinkable yogurt and cheese. The Australian dairy & soy food sector is expected to reach from US$8.11bn in 2018 US$9.77bn in 2023.

“The news of getting a green signal from ACCC comes at an extremely delicate time when China is going through tough times because of coronavirus and hence, it will be interesting to see how the deal will pan out in the future.”