Mengniu teams up with Arla
By Zhang Lu (China Daily)
Updated: 2005-08-27 08:50

HUHHOT: Mengniu Dairy Co is to form a joint venture with Europe's largest dairy products maker Arla Foods to make and sell milk powder products in China.

The two companies signed the co-operation agreement on Friday at Mengniu's celebration of its 6th anniversary.

The firms will jointly invest 540 million yuan (US$66.6 million) in the venture, which has registered capital of 180 million yuan (US$22.2 million). Mengniu will take a controlling 51 per cent stake with Arla holding the remainder.

The new venture, with a designed production capacity of 20,000 tons of milk powder a year, is to produce Mengniu-branded, high-end milk powder products, especially infant formulas.

"Through the co-operation with Arla Foods we will have a wider range of product lines and Mengniu-branded milk powder will take a bigger share in China's high-end milk powder market," said Niu Gensheng, president of Mengniu.

Currently the Inner Mongolia-based firm only produces a small range of milk powder products, most of which are for the rural market.

Jais Valeur, executive director of Arla Foods, described Mengniu's present milk powder business as "the ugly duckling," saying the firm has great potential for development.

"We have the necessary know-how with regard to added value milk powder products and our partner has an excellent distribution and sales network, which make for a good match," Valeur said.

Both companies expressed confidence in the future of the business.

"There is no dominant brand in China's high-end milk powder market," said Niu Gensheng. He believes the joint venture will turn a profit in five years in the potentially huge Chinese market.

For Arla Foods, "this partnership is key to its business strategy in the Chinese market," the company said in a statement on its website.

The Danish-Swedish company has a 136-year history, and its turnover reached US$8 billion last year.

Close