Chinese dairy giant to acquire majority stake in Pakistan’s Fauji Foods

• State-owned Yili seeks 51% majority stakes in a first Chinese foray in food sector of Pakistan
• Pakistan dairy sector to benefit from Research and Development experience of Yili, say analysts

KARACHI: Chinese dairy giant Inner Mongolia Yili Industrial Group is in the process of acquiring a 51-percent stake in Fauji Foods.
The Pakistani company, which produces a wide range of dairy products, juices and jams, has informed the Pakistan Stock Exchange.
Pakistan is the fourth-largest milk-producing country in the world, with annual output of 42 million tons. China produces 45 million tons annually.
State-owned Yili is the largest dairy producer in Asia and the eighth largest in the world. Its entry into the Pakistani market is seen as a major development for the local dairy sector. 
Yili has expertise in processing and marketing liquid and dry milk, yogurt, soybean milk powder and milk tea powder.
“The local market needs experienced players for value-added products,” Zeeshan Afzal, executive director of research at brokerage firm Insight Securities, told Arab News.
“Yili, with an international presence, can contribute to the development of the local dairy sector, which lacks research and development to a large extent.”
It is not the first international player to enter Pakistan’s food-processing sector. Dutch company Royal FrieslandCampina NV acquired a 51-percent stake in Engro Foods in December 2016.
“The arrival of Yili in Pakistan is expected to spur the growth of the food sector,” Khurram Schehzad, senior analyst and chief commercial officer at investment banking firm JS Global Capital Ltd., told Arab News.
“There are a limited number of companies operating in the food sector compared to the potential. This will also increase the food mix in the country.”
Schehzad expressed hope that Yili will improve hygiene conditions and the supply chain of packed food distribution in Pakistan.
Fauji Foods shares on Thursday closed at 38.09 Pakistani rupees ($0.31), up 0.33 rupees as investor interest increased after the Yili acquisition talks.