The increased spending will be focused on stepping up powdered milk output in its Hohhot base by about 1,200 tonnes, according to a statement released to the Shanghai Stock exchange on Monday. Yili was one of the dominant players in China's dairy industry last year, and is keen to further increase its competitiveness to its rivals in the region.
The move is likely to further increase competitiveness for dairy company's working within china's burgeoning dairy sector as producers struggle to keep up with demand for products. This Growing demand for Chinese dairy products, particularly in innovative sectors like longer life and infant nutrition products has seen significant global interest from foreign company's looking to capitalize.
As such Yili stressed the importance of keeping up with major rivals in the country like Mengniu and Shanghai Bright Dairy & Food Co, for supplying arrange of dairy products. In December last year, dairy giant Danone revealed it had formed a strategic alliance with Mengniu, to combine its technical expertise with the company's knowledge of the rapidly developing local markets.
Demand for dairy products in China has more than doubled in the past five years, and though domestic milk production is growing rapidly. China is only able to produce 24 million tonnes a year (liquid milk equivalents) of dairy products per year, according to Rabobank.
Although production of raw milk has been growing at a faster rate than demand recently, consumption is still expected to increase from an average 20kg per capita now to 30kg in 2015. The market is also becoming more sophisticated with consumers moving from milk powder to UHT milk and Chinese consumers becoming more brand conscious to ensure quality and food safety, according to the bank.
The move follows the company's announcement last year that it would invest US$500,000 in expanding its sales network in Mongolia to further drive this demand.