Chinese aseptic packaging company accelerates domestic substitution by acquisition

XINTAI, China, Jan. 17, 2024 /PRNewswire/ -- A report from Global Times:

As one of the largest dairy and milk consumers in the world, with an annual industry growth rate of about 10 percent, China has in recent years set its sights on aseptic packaging, an unassuming but critical phase for the milk industrial chain, which aroused market attention as Chinese companies strategize to break foreign monopoly through business mergers and acquisitions.

In the Chinese market, aseptic packaging demand is primarily driven by liquid milk products.  In 2022, the retail scale of domestic liquid milk reached about 440 billion yuan, marking a 4 percent year-on-year increase. The sector's compound annual growth rate is projected at 4.8 percent, supporting the burgeoning aseptic packaging industry, according to data from China Insights Consultancy.

Chinese leading aseptic packaging enterprise Shandong NewJF Technology Packaging Co., Ltd (NEWJF) announced in January 2023 its acquisition of a 28.22 percent stake in Greatview Aseptic Packaging and completed the acquisition in October of the same year, notably boosting NEWJF's competitiveness in the liquid product packaging market.

"From a macro point of view, the acquisition further enhanced China's food security and accelerated the domestic substitution in aseptic packaging sector," a representative from NEWJF told the Global Times, adding that the move also promoted a long-term steady development of downstream enterprises.

Both NEWJF and Greatview are prominent companies in the industry and their cooperation is seen as a strategic endeavor to enhance the overall competitiveness and productiveness of the domestic aseptic packaging industry.

The two sides' partnership includes a centralized fund for research and development aimed at upgrading domestic aseptic packaging technology, ensuring the security and independent development of the sector, said the NEWJF.

"NEWJF values this cooperation opportunity, and is willing to explore the aseptic packaging sector providing clients and industry with better services," said the NEWJF，as Greatview published circular and notice of Shareholders' Assembly on appointment of directors on January 9, 2024,"It is our right to appoint directors as the largest shareholder and we believe that diversifying Greatview's board of directors will expedite its sustainable development."

Founded in 2007, NEWJF, listed on the Growth Enterprise Market of the Shenzhen Stock Exchange in September 2, 2022, witnessed consecutive revenue growth from 2020 to 2022. Analysts believe that the acquisition will facilitate NEWJF in further exploring international markets.

About 20 years ago, aseptic packaging technology played a pivotal role in Chinese milk brands' nationwide development. This technology, which allowed for a six-month-expiration date for fresh milk, was initially monopolized by foreign companies, stifling the independent development of the domestic milk industry.

At the time, Swedish aseptic packaging company Tetra Pak held over 90 percent of the domestic market share, cooperating with Chinese milk giants Yili and Mengniu. Before 2008, the cost for aseptic packaging accounted for about 30 percent of the overall cost of milk products, and compressed the profit margin of the milk industry.

According to a report from Chinese analysis firm TF Securities, in 2020, Tetra Pak still accounted for over 50 percent of domestic market share, , while domestic aseptic packaging brands are expected to gradually increase market share by breaking through technological monopolies, and entering the core customer supply chain with a price advantage.

NEWJF became qualified provider of aseptic packaging material for Yili in 2009 and it solidified its ties when Yili bought a 20 percent stake in NEWJF in August 2015.  While Yili's current stake has been reduced to less than 5 percent at present, it still remains NEWJF's largest client, generating 70 percent the packaging company's revenue.

Greatview Aseptic Packaging accounts for about 40 percent of products of Mengniu, and is also the core supplier of New Hope Dairy and its wholly-owned subsidiaries Xiajin Milk.

The acquisition helped NEWJF resolve overcapacity issues with Mengniu and enhance production efficiency by adopting a universal management system. The collaboration between the two leading companies also facilitated the healthy development of the industry, moving away from price wars.

What's more, Greatview's overseas manufacturing bases and aseptic filling machine technologies were also a catalyst for the domestic substitution process of aseptic packaging, further boosting NEWJF's global business.

Business insiders said the acquisition positions NEWJF as the most promising aseptic packaging company in China, with the potential to replace Tetra Pak.

According to data from SWS Research, domestic demand for aseptic packages was 113.6 million in 2022, up 3.2 percent year-on-year. The market scale has grown to 20.1 billion yuan, reflecting a 4.1 percent year-on-year increase.

Considering the numerous opportunities in China's milk and beverage market, NEWJF is expected to replicate Tetra Pak's successful path and grow into a "Hidden Champion" in the unassuming industry of aseptic packaging.

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