Dairy Industry In China: How To Deal With Foreign Investment?

Taizi Milk Group, a Chinese dairy company famous for its fermented milk products, is facing with restructuring problem recently.

Since Taizi Milk got 73 million dollars investment from Goldman Sachs, Morgan Stanley and CDC Capital Partners in 2006, the company has been too eager to expand in domestic as well as foreign market. On the website of Taizi Milk Group, the company asserts that Taizi Milk is “the leader in the lactic acid fermented food market in Asia area”, and shows its ambition to become even larger, “with the help of investment funds from the top international banks”. However, Taizi Milk ignores the fact that foreign funding support doesn’t ensure the sustainable development of a company, which comes mainly from the consistent improvement in the quality of its foods as well as the customer-oriented innovation of new products.

Taizi Milk is not the only Chinese dairy company struggling for survival. The negative influence of the tainted milk problems (Learn More from WiKi) in 2008 is still haunting Chinese dairy companies. But rather than improving the quality of dairy products to fix the damaged reputation, Chinese dairy giants are depending on expensive TV advertisement, expanding oversea market and organizing fundraising events for recovery. It may work well in a short time, which could win the trust from Chinese customers. But as long as food safety problems haven’t be solved, the local dairy companies couldn’t go further.

Foreign investment is always a good thing. But if it is used in a wrong way, it also could become a heavy burden for the company.

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