Chinese private equity firm Tiantu Capital has invested RMB50 million ($8.25 million) in Qinghai Xiaoxiniu Biological Dairy Industry Co. Ltd., according to a company announcement.
Tiantu Capital made the investment through its sixth RMB fund, which closed fundraising last August with a total capital commitment of over RMB1 billion ($165 million). The fund focuses on investing in China’s consumer industry.
As part of the deal, Tiantu Capital’s partner, Li Kanglin, will join the board of Qinghai Xiaoxiniu.
Founded in 2002 in Xining city in Qinghai province, Xiaoxiniu makes and distributes specialty yogurt and milk drinks.
In 2012, the company filed for an IPO on the Shenzhen Stock Exchange to raise RMB12.5 million ($2 million), but was rejected by the Chinese securities regulator.
Founded in 2002, Tiantu Capital has offices in Shenzhen, Beijing and Shanghai. The private equity firm manages six RMB funds and has invested in over 50 companies.
Private equity firms have been very active in China’s dairy industry lately. Last November, Hong Kong-listed Chinese dairy firm Yashili International Holdings Ltd. says that Temasek Holdings, Hopu Investment Management Co. and three private investors will buy a 13.24% stake of the company from China Mengniu Dairy for HK$1.6 billion ($213 million).
Last September, Kohlberg Kravis Roberts & Co. and CDH Investments formed a joint venture with Modern Dairy to build two large-scale dairy farms in China.
The Chinese dairy sector has already provided profitable returns for some private equity firms. Last May, KKR and CDH Investments agree to sell their stakes in China Modern Dairy to China Mengniu Dairy in a potentially profitable partial exit.
According to Euromonitor, China’s total dairy consumption grew at 10% compound annual growth rate over the past five years, with premium dairy product consumption growing significantly faster than the overall market. Premium dairy product consumption’s market share also expanded from 10% to 19%.
Despite the strong growth, China’s per capita liquid milk consumption is less than 10kg per year, compared to 32kg in Japan and 78kg in the United States.