China Mengniu Diary Co has teamed up with European milk giant Arla Foods in a bid to reinforce its milk source management, but analysts said Sunday that local brands need to strengthen their own capabilities to solve the problems in domestic dairy industry.

"The cooperation can bring in advanced management experience, but problems like quality control in milk production will still mainly rely on our own companies and authorities," said Song Liang, a dairy industry analyst at the Distribution Productivity Promotion Center of China Commerce.

Mengniu stated Friday that the largest milk producer in Europe, Arla Foods, has bought 5.9 percent of Mengniu shares at a price of 1.7 billion yuan ($267.09 million), making the Danish company the second largest shareholder of Mengniu, after National Cereals, Oils and Foodstuffs Co.

Sun Yiping, who replaced Yang Wenjun as Mengniu's CEO in April, said the agreement will enhance the company's ability in managing dairy farms, developing milk products, and building a quality tracking system.

"The deal can bring much-needed cash to Mengniu," said Wang Dingmian, former vice chairman of the Guangdong Provincial Dairy Association.

Mengniu announced last week that it will spend 3.5 billion yuan to set up eight to 12 dairies by 2015 to have 100 percent control over its raw milk supply.

"But the deal may have a negative impact on the sector as it enhances presence of foreign brands and increases the chances of monopoly by foreign brands, just as what happened in the soybean and automobile sectors," Wang said.

Arla said it expects its investment in Mengniu to increase its turnover in China fivefold by 2016 compared with last year.

China has presented huge potential for milk powder consumption and has attracted an increasing number of global dairy producers to the market. Domestic dairy companies, on the other hand, are gradually losing the trust of the public after the 2008 melamine scandal that caused the deaths of at least six children and affected another 300,000.

Recurring safety scandals of big brands like Mengniu and Yili have infuriated consumers. In the latest scandal, several batches of Yili baby formula products were found to contain excessive mercury, which could be toxic if consumed in high quantities.

"Mengniu's cooperation with foreign giants can help win consumer trust to some extent," Song said. "But deep-rooted problems like poor quality control in dairy farming and milk processing cannot be solved by the deal."

But it is encouraging that big companies, which used to focus on sales channel expansion and product development, nowadays realize the importance of milk source and have began to build their dairy farms.

Yili invested 400 million yuan to build two dairy farms in Huanggang, Central China's Hubei Province in 2011. Shanghai-based Guangming also spent 130 million yuan on establishing a farm in the province earlier this year.