Swiss food giant Nestlé spent $11.85 billion buying Wyeth –the infant nutrition brand of Pfizer Inc. (NYSE:PFE), the U.S pharmaceutical giant, which has been approved by the China Ministry of Commerce, approved the acquisition last week, and has been confirmed by Nestlé Company.
“Although other approvals were still necessary, China was a ‘big one’. It’s a very important approval. I am very positive,” added Paul Bulcke, Nestlé Chief Executive.
The deal, which has already been approved by the Indian competition authorities, allows Nestle to make a big leap into the rapidly growing Asian baby food market by building its presence in China, reported Fox Business.
Pfizer announced in July last year its plan to focus its core business on pharmaceuticals. After this acquisition, employees currently engaged in the nutrition sector will be transferred to Nestlé in the first half of 2013.
Data from AC Nielsen reveals that Wyeth takes 12 percent of China’s milk powder market, while Nestlé takes nearly 5 percent.
According to Euromonitor International, China is one of the fastest growing infant nutrition markets in the world with a growth rate of 21 percent in 2011, double the average global rate.
“They will become the largest milk powder producer in China,” said an insider, “they have built an integrated team to coordinate cooperation between Nestlé and Wyeth.”
Experts predicted that Nestlé would conduct a double-brands model as milk powder is one short plate of Nestlé. If the Wyeth brand were abandoned, Nestle would lose significant resources such as consumers and distributors, said Wang Dingjin, an expert in the dairy industry.
The success of this acquisition will further concentrate the foreign milk powder market with high prices in China, which makes Chinese consumers worry about the dominance in milk powder market would lead to even higher prices.
The price coordination between brands under Nestlé and Wyeth is difficult to avoid, said Wang Dingjian, and there are no good method to prevent price increases at the moment.
Source: Morning Whistle Nov 2012