By Ulla Kjer, Journalist, Arla Foods Corporate Communications Department
Arla Foods in the World’s Largest Powder Market Through its joint venture partnership with China’s leading dairy company, China Mengniu Dairy Company, Arla Foods is now established in the world’s largest milk powder market. The partnership involves both local production and imports of milk powder.
Mengniu’s modern dairy complex is located in the Chinese city of Hohhot, 300 km North-West of Beijing, on the Inner Mongolian plateau. With its two-year-old powder plant, Mengniu currently produces 8,000 tons retail-packed milk powder per year for China’s domestic market. Three senior executives from Arla Foods Ingredients recently took up their new positions in Hohhot: Jais Valeur as Managing Director of the joint venture ArlaMengniu, Ulrik Sletten as Factory Director and Lilli Li Ekhard who is responsible for Marketing and Business Development. Important sales and distribution system Jais Valeur explains why Arla can-
Former Sales Director, Arla Foods Ingredients, Jais Valeur, has been appointed Managing Director of ArlaMengniu.
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not only export milk powder to the Chinese market: “We must be involved with local production because the market is so large that we cannot depend on exports alone.” One obvious challenge is the distances in a country that extends 3,500 km from North to South. As 76% of the milk is produced in the North-Western part of China while 72% of the population lives in the South-Eastern part, the market for UHT products and milk powder is huge. “It’s important for us that Mengniu has an excellent sales and distribution system,” says Jais Valeur. “On the other hand, they have little know-how about the powder area and this is where we come in.” As an initial step, the joint venture will embark upon an upgrading of the powder plant’s processing and packaging equipment in order to produce powder of a higher and safer quality. Arla Foods will buy the milk from Mengniu for the production of retail-packed milk powder at the plant. In addition, premium milk powder from Sweden and Denmark will be imported and sold under the Milex brand. “Although the price is higher for a premium brand, there is clearly a market for products at this end of the price scale,” says Jais Valeur.
On February 6, Ulrik Sletten left his job as Factory Director at Arla Foods’ powder factory, Arinco, for an equivalent position at Mengniu’s milk powder factory. “This is partly because of China’s one-child policy, which means that parents and grandparents can afford to pay more for a high quality product.” Moreover, imports of dairy products to China have become easier since the government reduced import levies from 30% to 10%. Aiming to be the best With economic growth in China of around 10% per year over the past 10-15 years, the potential for consumption in a country with 1.3 billion inhabitants is enormous. “We believe the total retail market for milk powder to be in the region of 360,000 tons, which makes China the world’s largest market,” says Jais Valeur. “Besides, consumption of milk powder per inhabitant in China is currently
MÆLKERITIDENDE 2006