Italian dairy firm Parmalat has withdrawn from the Chinese market, transferring operation of its joint venture, in which it holds 65 per cent, to Nanjing Milk of Jiangsu province, Economic Observer said. Under the agreement, Nanjing Milk will run the plant for three years and maintain monthly production of 4,500 tonnes of milk under the Parmalat brand and use additional capacity to produce its own Wei Gang brand. After three years, Parmalat has the right to return to the venture but Nanjing Milk will probably buy out the Italian side, which it would like to do now but cannot yet afford.
The joint venture prospered for its first 17 months but started going into the red at the beginning of last year due to intense competition from Shanghai-based Guangming Milk Group in its major markets of Shanghai, Nanjing and other cities in Jiangsu.
Parmalat is not the first foreign dairy firm to leave the China market. In 2001, the San Yuan Dairy paid US$9.3m to buy out the milk production of US dairy producer Kraft in Beijing and last year Danone sold its two milk businesses to Guangming in exchange for a 5 per cent share of the Chinese firm.