June 20, 2019

China's Dairy War Threatens 2022 Olympics

 |  By: Bloomberg News

China’s biggest dairy company has warned that it may pull out of sponsoring the 2022 Winter Olympics in Beijing because of its local rival.

In a rare open letter posted on its official WeChat account on Thursday, Inner Mongolia Yili Industrial Group Co. lashed out at China Mengniu Dairy Co. for allegedly infringing its status as the sole sponsor of dairy products at the Beijing games. Mengniu has supposedly signed up to be a “joint beverage global partner” of the International Olympic Committee with Coca -Cola Co., bypassing the local organizers and government agencies, said Yili.

Yili said in its letter that this would confuse Chinese consumers, leading them to believe that Mengniu, whose largest shareholder is Chinese food giant Cofco Corp., is also a dairy products partner of the Beijing Games. It may quit its sponsorship altogether, and cut all ties with the Olympics after 2024, Hohhot-based Yili said. The WeChat post was later deleted from its account.

Yili and Mengniu are fierce rivals in China’s $62 billion dairy products market, which is projected to overtake the U.S. to become the world’s biggest by 2022, according to Euromonitor International data. The two giants, each with market share of about a fifth, are competing to secure foreign milk sources and brands as Chinese consumers spend more on premium items like organic yogurt, ice cream and cheese.

Representatives of Mengniu, Yili and Cofco couldn’t immediately comment. A Coco-Cola representative did not immediately respond to a request for comment. Yili’s Shanghai-traded shares gained 2.7% to its highest level since Feb 2018, while Mengniu’s stock ended flat after fluctuating between gains and losses on Thursday.

The Winter Games in Beijing, the capital city’s second time hosting the Olympics, will likely drive greater participation in winter sports in China and boost demand for winter athletic gear, Bloomberg Intelligence analyst Catherine Lim said in a note in March. Besides Yili, China’s biggest sportswear maker Anta Sports Products Ltd. and lender Bank of China Ltd. are also official sponsors.

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