Foreign brands are gaining a solid foothold in China's milk powder market, mounting pressure on the local companies.

In the first half of 2011, China's formula imports rose 32 percent from the previous year to reach nearly 300,000 tons, around 72 percent of last year's total.

The dairy industry received a deadly blow from a melamine-tainted baby formula scandal in 2008, which undermined consumer confidence for domestic dairy brands, and offered a chance for foreign firms to expand.

New Zealand's Natural Dairy, for example, aims to open 3,000 retail stores in 24 provinces and municipalities across the nation this year. In another move, the U.S. giant Abbott Laboratories invested $230 million to build a new plant in Jiaxing, Zhejiang Province, to produce infant formula.

China is now the world's largest dairy market. The U.S. Department of Agriculture said China's whole milk powder consumption had reached 1.337 million tons in 2010.

"Before the scandal in 2008, Chinese brands controlled 60 percent of the market, while 40 percent went to foreign companies," said Wang Dingmian, Chairman of Guangzhou Dairy Association. "But now they have switched positions."

Zhang Weiying, Secretary General of Dairy Association of Heilongjiang Province, said at least one third of formula producers in the province are struggling with mounting inventories due to sluggish sales.

"It will take time for domestic businesses to recover their lost ground," said Zhou Siran, a researcher with the Shenzhen-based think-tank CIConsulting. "The key is to improve product quality, rebuild consumer confidence and avoid vicious price wars."