DSM gains full control of vitamin joint venture in China
group to buy out its stake in a vitamins joint venture,
strengthening the Dutch group's presence on the Chinese market,
reports Dominique Patton.
Known as Roche (Shanghai) Vitamins Limited (RSVL), the venture was set up by DSM's former owner Roche and the Shanghai Pharmaceutical Group (SPG) in 1996. DSM said today that it will buy SPG's 36 per cent share in the business for around €10 million.
Full control of the joint venture increases DSM's presence on the Chinese vitamins market, growing significantly faster than the more mature European markets.
"This fits with our ambitions to grow in China. Shanghai Pharmaceutical wanted to focus on their pharma busines and we are looking to expand in vitamins so it seemed like the right time to gain full ownership," a DSM spokeswoman told NutraIngredients.com.
Figures from Euromonitor show that value sales of vitamins in China grew by 30 per cent to RMB1.07 billion (€0.1bn) during 2003 triggered by the SARS epidemic. During the SARS outbreak, more than 20 brands entered the vitamins sector in a period of four months, according to the market researchers, finding space to launch when top brands like Roche's Redoxon vitamin C, sold out.
DSM's presence in China will also allow it to alleviate some of the price pressure being placed on its core products by Chinese suppliers. The company is known to be looking at options for its vitamin C production, currently shared by two plants in Scotland and the US.
The vitamin has long been subject to continuous fluctuations in price and is currently selling for as little as $3 per kg from Chinese suppliers.
Last year's investment in one of the country's largest vitamin makers and a major player in bulk vitamin C, the North China Pharmaceuticals Group, is designed to create new opportunities for joint ventures, particularly related to vitamin C.
Roche Vitamins in Shanghai produces vitamin A, vitamin E, vitamin B6 and vitamin blends for the animal and human nutrition markets from two sites in Shanghai. It generates annual sales of approximately $85 million, selling both to the domestic market and other parts of the world.
Under the new deal the business will become a wholly owned subsidiary of DSM Nutritional Products and be renamed DSM Vitamins (Shanghai) Ltd.
The transaction is still subject to the appropriate regulatory approvals in China and is expected to close by the end of the first quarter of 2005.
DSM said last year that it expects to at least double its overall sales in China to €600 million by 2008, through a combination of expanding the capacity of existing plants in China, building new production bases and acquisitions.
