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Bright Dairy & Food Co Ltd, Shanghai's largest diary products maker, plans to team up with Uni-President Enterprises Corp to expand into the soft drink business as the local firm looks at ways to widen its profit.
"Uni-President and Bright are both market leaders in the beverage and dairy industry respectively," said Yan Boming, Taiwan-based Uni-President's deputy chairman, according to Oriental Morning Post.
"Bright has a large distribution network on the mainland while Uni-President is a specialist in making beverage. It is the base of our cooperation."
Yan added that the two companies would form a joint venture to produce fresh beverage products including fruit juice, various tea drinks and coffee. The companies, however, would not buy shares in each other.
Gong Yanqi, Bright's spokeswoman, said the two parties had been in close contact since November but declined to comment more.
Currently, the beverage sector only accounts for less than 5 percent of Bright's sales, as it is selling only fruit juice.
Uni-President is a leading beverage and instant noodle producer. It grabbed 36.6 percent of the tea drinks market and 12.1 percent of the fruit juice market in Shanghai last year, according to Business Information of Shanghai, a research organization backed by the Shanghai Economic Commission.
"Bright's move is related to the mounting competition in the domestic dairy market," said Ding Pin, an analyst with Haitong Securities Co Ltd. "Inner Mongolia-based Yili Corp and Mengniu Dairy Co Ltd, as well as other competitors, have threatened the business of Bright in the dairy market."
Ding added that the tie-up between Tingyi (Cayman Island) Holding Corp, Asahi Breweries Ltd and Itochu Corp to explore the domestic beverage market in January pushed Uni-President to find ways to secure its position.
Tinyi owns the Mr Kon brand of beverages and instant noodles and is the largest competitor of Uni-President.
In 2003, Shanghai sold 107,000 tons of fruit juice, a 28 percent rise from a year ago.
(Shanghai Daily March 10, 2004)
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