State-owned food conglomerate Cofco is playing a more active role in China Mengniu Dairy, and has raised its stake after an excessive amount of a carcinogenic substance was found in its dairy products last month.
The mainland's largest grain trader has reportedly been participating in Mengniu's daily operations, including quality control, despite having said it would not do so when it became a shareholder four years ago.
In addition, Cofco increased its equity to 28.09 per cent from 27.96 per cent after buying 220 million shares for HK$41.12 million last Friday, according to its filing with the Hong Kong stock exchange.
The move is seen as a vote of confidence in Inner Mongolia-based Mengniu, which was among the dairy firms involved in the melamine milk contamination scandal in 2008.
'It's good timing for Cofco to enhance its role in Mengniu,' said Titus Wu, food and beverage analyst at DBS Vickers Securities.
Wu said Cofco, a leader in the mainland's food processing industry, would help Mengniu by sharing its food safety know-how.
However, it would take time for new quality-control measures to take effect because of the dairy producer's expanded production facilities and the fact that its suppliers were spread across the mainland, said Sunny Kwok Yap-sing, an analyst at Guotai Junan Hong Kong.
