Arla in milk powder joint venture in China

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26 August 2005
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Arla Foods and the Chinese dairy company, China Mengniu Dairy Company, have signed a joint venture for the production of milk powder in consumer packs for the Chinese market.

With effect from October 1, 2005 Arla Foods and the Chinese dairy company, China Mengniu Dairy Company, are setting up a joint venture in which Arla has a 49% stake while Mengniu owns 51%.

“The move into the Chinese market is an excellent example of a combination of export and local production of retail packed milk powder,” says CEO Peder Tuborgh, Arla Foods. “At the same time it is important for us to replace bulk production with several added value products for the benefit of our co-operative members.”

As milk powder in consumer packs is a strategic core business for Arla Foods and as China is the world’s largest market for consumer packed milk powder Arla Foods has a natural interest in the potential within this market, which is showing clear signs of growth. The increasing imports of milk powder have been a further factor.

The joint venture will undertake local production of milk powder as well as distribution in consumer packs and will also handle imports and distribution of added value Scandinavian produced milk powder. The company is expected to gain a strong position in the Chinese market.

Ambitious partner
China Mengniu Dairy was founded in 1999 by the management team, headed by Mr Niu Genseng. Five years later, in 2004, the company was listed on the Hong Kong Stock Exchange with the assistance of Morgan Stanley. Located North of Beijing with excellent conditions for milk production, Mengniu is not only China’s leading dairy company but also the fastest growing.

“Partnership is the key to our business strategy in the Chinese market,” says Sales Director Jais Valeur, Arla Foods Ingredients. “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 makes for a good match.”

Mengniu Dairy’s highly modern dairy plant is an added benefit to the joint venture. The same is the case with the company’s solid track record. In 2004 Mengniu Dairy recorded a turnover of DKK 5.5 billion.

84% of the company’s current sales are based on long-life milk, milk drinks and yoghurt while ice-cream accounts for 11% and milk powder 5% of the turnover.

For further information:
Astrid Gade Nielsen, Head of Communications
Ph. 45 89 38 10 00

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Arla Foods is an international dairy company owned by 9,700 farmers from Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands. Arla Foods is one of the leading players in the international dairy arena with well-known brands like Arla®, Lurpak®, Puck® and Castello®. Arla Foods is focused on providing good dairy nourishment from sustainable farming and operations and is also the world's largest manufacturer of organic dairy products.

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