Beingmate, the company that Fonterra purchased an 18.8% stake in for ¥3.46bn (€484.4m) earlier this year saw half year revenues fall by 26.3% to ¥1.77bn (€248m).

Hong Kong-listed company Biostime had a drop in revenue of 10% to ¥1.96bn (€274.4m) for the same period.

Ming Chou, analyst at China Mahon Investment Management, blamed massive increases in production coupled with lower than expected birth rates for the decline in infant formula sales. He also said the government breast feeding campaign is taking its toll.

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According to Chou, Beingmate’s dismal performance was exacerbated by internal problems. The company abandoned its distribution channel of third-party wholesalers in order to build its own sellers. Last month media reported Beingmate closed up to 500 of these shops because of flagging sales and high costs.

Fonterra planned to increase sales for the company, but held back because of reported internal disagreement on the strategy.

Increase in imports

However, sales volumes of imported formula in China increased by 28% to 89,000t for the first seven months of this year.

This is due to greater sales from Ireland and the Netherlands, which account for 50% of all infant formula imports. There were also gains for Germany and South Korea, according to the China’s latest customs data.