The Carlyle Group Acquires Minority Stake in Yashili Group; Investment Supports China’s Rapidly Growing Infant Formula Industry

China – Global private equity firm The Carlyle Group today announced its minority stake investment in Guangdong Yashili Group Co., Ltd., one of China’s largest infant formula companies. The investment, made through Carlyle Asia Partners, will help Yashili contribute to the ongoing modernization of this industry. Carlyle obtained a 17.3% stake in Yashili. Further financial details were not disclosed.

Patrick Siewert, Senior Director of Carlyle Asia Partners, said, “We see great scope to contribute to China’s rapidly growing infant formula industry through this investment. The infant formula market in China is undergoing a positive transformation and is set to continue its strong growth trend. Yashili has achieved impressive success in recent years and is well-placed to capitalize on increased demand across the country.”

Mr. Zhang Lidian, CEO of Yashili Group, said “We are always looking for value-creating partnerships that help deliver our core commitment to quality, nutrition and children’s health. Our partnership with Carlyle will greatly enhance management and operations by bringing international best practices, rigorous standards and strictest quality control, as well as adding to our financial strength.”

As part of the agreement, Carlyle will bring resources to further strengthen Yashili’s management expertise, enhance R&D capabilities and create a world-class quality control system. Specifically, these measures include:

    Recruiting an experienced Chief Quality Officer (CQO) to assume supervision and oversee implementation of product quality control protocols;
    Strengthening quality control measures under the guidance of a newly-formed Food Quality and Safety Advisory Committee (FQSAC), composed of leading international and domestic experts;
    Establishing R&D collaborations with top-tier international research institutes to strengthen infant nutritional research and product development.

According to data from China Dairy Association, China's infant formula industry has experienced an annual growth rate of nearly 30% in recent years. The strong growth is driven by increasing affluence of Chinese families, urbanization, as well as continuous demand for higher quality products. Consumers' increasing emphasis on health and safety is an important driver of the industry's development. Second- and third-tier cities, in particular, are expected to experience the fastest growth in infant formula demand in the next few years.

Song Kungang, Chairman of China Diary Association, said: “China’s dairy industry presents a great opportunity for investment. We are pleased to see a value-adding partnership of this kind that draws on international resources to raise product standards. This positive impetus will stimulate a healthy competitive landscape that is needed for the long-term development of the industry.”

Wan Qingliang, Vice Governor of Guangdong Provincial Government, said, “By forming strategic partnership with Carlyle, Yashili is able to embrace an aggressive approach to continuously elevate its quality and product R&D up to the international standards. The Yashili-Carlyle cooperation sets a good example for the industry to rigorously transform and upgrade itself.”

Established in 1983, Yashili has grown from a small workshop to one of the largest providers of infant formula products in China. Headquartered in South China’s Guangdong Province, the company has a clearly defined market positioning, strong distribution network and high brand awareness amongst its target market across China. It has been able to effectively differentiate itself from multinational brands while benefiting from the higher-than-average growth offered by second- and third-tier cities.

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