Some analysts said the price hikes could further delay a
recovery in the country's dairy industry which was shaken again in December by
a milk scandal at Mengniu, while others said it could fuel competition in the
sector.
"It may not be a good thing for Mengniu as it may
lose market share to competitors in the short run, but its prospects remain
promising in the long run," said Conita Hung, head of equity research at
Delta Asia Financial Group.
Mengniu said the increase, the size of which it did not
reveal, took effect at the start of the year, while a spokesman at Beijing
Sanyuan Foods Co. Ltd. said it had hiked prices by 0.10-0.20 yuan to compensate
for rising raw material, labor and logistics costs.
The Southern Metropolis Daily newspaper reported on
Wednesday that Inner Mongolia Yili Industrial Group Co. Ltd. had also raised
prices. Yili officials were not immediately available for comment.
Mengniu, which produces milk, ice-cream and yogurt, said
last month it had destroyed products found by a government quality watchdog to
contain a cancer-causing substance called aflatoxin. The company lost about a
quarter of its market value in a single day after the scandal was
revealed.
Mengniu also competes with foreign players including the
world's largest food company Nestle and French foodmaker Danone in the
mainland.
Last week, China's quality watchdog said it had found no
further cases of milk tainted with high levels of carcinogenic mildew after
testing products of major dairy producers.
"We expect Mengniu will take 4-6 months to regain
sales momentum to pre-crisis levels," Alex Cheng, an analyst at ICBC
Equity Research, said in a research note.
BOCI Research has revised down Mengniu's earnings
estimates by 9 percent and 2 percent for 2012 and 2013, respectively, but the
broker retains a "buy" on the stock due to a promising industry
outlook.
Shares in Mengniu, were up 4 percent on Wednesday,
outpacing a slight fall in the Hang Seng Index. Sanyuan's stock was down 0.4
percent, while Yili fell 2.6 percent.
China is a huge growth market for dairy as demand from a
growing middle-class increases rapidly, although a big challenge is to supply
high-quality brands that satisfy domestic demand.
Many Chinese consumers, especially parents of infants,
buy imported milk powders due to safety fears over locally made products, creating a favorable market
for imported milk powder. In 2010, China imported over 400,000 tons of milk
powder, a 60 percent increase over 2009, according to China Research and
Intelligence.
Investors in Chinese dairy companies got hit three years
ago after tainted milk was blamed for the deaths of six children. Shares in
Mengniu plunged 65 percent in 2008, although they have roughly doubled since
then.
