In a statement filed to the Shanghai Stock Exchange yesterday, Bright Dairy and the four listed units owned by the state companies said the plan was "in accordance with the reform initiatives of state-owned enterprises".

The move is led by government in a bid to improve the efficiency and market share of the state-owned firms. But it could offer some advantages for Bright Dairy, a public company, too.

Wang Dingmian, deputy chairman of Guangdong Dairy Association, said that the move may help Bright Dairy better compete against dairy leaders Yili and Mengniu.

"If it wants to increase its sales to compete with Yili and Mengniu, it may need to make use of other groups' sales outlets; and a big food industry group will have more bargaining power when buying raw materials," he told AP-Foodtechnology.com.

Last year, Yili reported sales volumes of CNY12.7 billion while Mengniu achieved CNY10.8 billion. Bright Dairy had only CNY6.9 billion.

The new conglomerate will incorporate Shanghai Tobacco, Sugar & Wine (Group) Co, Shanghai Agriculture Industry Commerce Group and Shanghai Meilin Zhengguanghe into the Bright Dairy & Food group, with total assets estimated at CNY45 billion (€4.45bn).

Aside from Bright milk, the group will own a number of well-known Chinese food and drink brands including White Rabbit confectionery, Guangshengyuan snacks, Shangshi meat products and Shikumen alcohol.

A preliminary restructuring plan for the new group may come out as early as August and the new conglomerate may be set up any time after that, the Shanghai Securities News quoted insiders as saying.