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ANALYSIS

Ma looks to work his magic on China's dairy industry

From media to online financial services and milk products, Alibaba boss is steadily building a conglomerate that will touch many people's lives

PUBLISHED : Saturday, 05 July, 2014, 1:51am
UPDATED : Saturday, 05 July, 2014, 2:17am

As a layman who started his professional career as an English teacher, Alibaba Group Holding co-founder and executive chairman Jack Ma Yun does not know much about making films, running a soccer team or being a dairy producer.

But the wealth and influence gained from building Alibaba into the world's largest e-commerce company has given Ma ample resources to invest in such enterprises - either through his corporate flagship or other private entities - and hopefully make a big difference.

Through Hangzhou-based Alibaba's HK$6.24 billion takeover of ChinaVision Media Group in March, Ma gained entry into a raft of new endeavours, including production and distribution of films and television drama programmes, satellite television advertising, mobile digital content delivery and the print media business.

Last month, Alibaba paid 1.2 billion yuan (HK$1.5 billion) for a 50 per cent interest in Guangzhou Evergrande Football Club.

This made Ma the team's No1 patron, not unlike those wealthy foreign patrons to Europe's leading professional football clubs.

His latest bet, however, could help further secure his position as one of the mainland's titans of industry.

Through Yunfeng Capital, the private equity firm he co-founded in 2010, Ma joined forces with Citic Private Equity Funds Management last month to invest about US$2 billion for a combined 60 per cent stake in Inner Mongolia Yili Industrial Group.

Ricky Lai, a research analyst at Guotai Junan International Holdings, said Ma's involvement could help spur innovation at Yili, the mainland's second-largest dairy producer by revenue.

Small developers could find it difficult to manage [the large area]
ANTHONY CHU, FAR EAST CONSORTIUM

"Ma is steadily building a large conglomerate that would touch the lives of many people on the mainland," Lai said. "But it remains to be seen exactly how this would play out in the dairy industry."

He said it was "no surprise" that Ma would make an attempt to disrupt another industry, following Alibaba's successful foray into online financial services to compete against traditional banks.

Large domestic dairy producers such as Yili, China Mengniu Dairy and Shanghai-based Bright Dairy & Food are spending billions of dollars on building and investing in farms, while also expanding overseas to ensure they get a safe and stable milk supply amid increased demand.

According to the Dairy Association of China, total milk yields on the mainland fell a record 5.7 per cent to 35.3 million tonnes last year.

Widespread scrutiny of the mainland's dairy products has also persisted since a scandal in 2008 involving formula milk products tainted with melamine, an industrial additive, which killed six children and caused ailments such as kidney problems in 300,000 others.

In Inner Mongolia, the mainland's largest province for dairy production, the lack of land, capital and technology resources has remained the major challenge for small-scale dairy producers, according to a report by the Agricultural Attache of the United States Embassy in Beijing.

Stricter requirements for dairy and infant formula milk are expected to reduce supplies by small-scale producers.

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