In H2 2015, foreign dairy companies such as
Fonterra, Maeil, FrieslandCampina and Morinaga have retained their strategic
focus and expanded their businesses in China – 2016 is likely to see this trend
continuing.
In 2015, a number of foreign dairy companies invested further in China, either
establishing farms directly to produce dairy products locally or cooperating
with domestic dairy companies to launch new products. This continued in H2,
especially at the end of the year, with an acceleration up notable in their
local expansion. Two good examples are Fonterra and Maeil:
Fonterra to Focus on Foodservice and
Bakery
On 29 October, Fonterra set up its 2nddairy application centre in
Guangzhou (in addition to that in Shanghai), to cope with the increasing demand
for its premium Anchor brand from China’s foodservice and bakery markets. “In
recent years, such businesses in China have developed rapidly, typically by
20%+ each year”, said Zhu Xiaojing, General Manager of Fonterra Greater China:
“Moreover, consumers are demanding high-quality dairy products to be used in
these fields”. At its annual meeting in New Zealand on 25 November Fonterra CEO
Theo Spierings noted its plan to build the company into a top dairy supplier in
China: “In the next five years, our local sales should double to about USD6.8
billion (NZD10 billion, NZD/USD exchange rate @ 0.6796 sourced from Hexun.com
on 24 December)”.
Maeil Concentrating on Special Infant
Formula
In 2015, Maeil (South Korea) has made export sales of around USD50 million,
of which 90%+ came from China. “We aim to enter China’s top 10 infant formula
list by 2020”, the company has stated.
On 24 November, the 2015 Maeil Asian Breast Milk Research Centre Forum was held
in South Korea. During this event Maeil indicated that its JV – Hangzhou
Beingmate Maeil Food Co., Ltd. – will produce 2 special infant formulas: one
lactose-free and the other a partially hydrolysed formula (pHF). In addition,
it plans to successively introduce its 6 special infant formulas addressing
inborn errors of metabolism (IEM) into China and 8 infant formulas.
Other examples of growth by foreign dairy companies in the Chinese market
include:
Royal FrieslandCampina N.V.
(FrieslandCampina): from 1 January, 2016, all businesses in its Greater China
division will belong to a new business group, FrieslandCampina China. In
September, group CEO Roelof Joosten noted that the company would expand its
product range in China: “In addition to Friso, we will consider UHT milk,
cheese, condensed milk, etc.”
Morinaga Milk Industry Co., Ltd.
(Morinaga): on 16 October, it established a JV with Zhejiang Mingwang Dairy
Co., Ltd. (part of Taiwan’s Want Want Group) in Shanghai, to handle imports and
sales of Morinaga’s infant formula from early 2016
“Such developments in late 2015 are just a signal, indicating that next year,
more foreign dairy companies will expand further in China”, commented Yuan
Yunsheng, Secretary General of the Hebei Dairy Association: “Especially those
in South Korea, where the local market is depressed”.
Since 2013, South Korea has seen continuous increases in dairy inventory. By
September, the figure was 262,000 tonnes, up by about 40% YoY. Local household
expenditure on fresh milk was only USD10.4/month, down by 16.3% over 2012;
average household milk consumption was about 4.9 kg, down by 15% over 5.8 kg in
2012.
“As the free trade agreements are signed, dairy products imported into China
will be increasingly price competitive, so domestic dairy companies will face
greater challenges”, continued Yuan Yunsheng: “They can only survive by
differentiating themselves in the market through developing real innovation
capabilities”.
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Tag: Fonterra, Maeil