Danish dairy brand Arla is now getting substantial new business from the export to China of existing foodstuffs as well as newly developed products specifically aimed at the market.
“The demand for dairy products is really rolling in China and the Chinese market is huge. We may be a much bigger business compared to other companies in Russia and the Middle East, but our growth potential in China is by far the most promising. We are now working on getting some of that potential,” said Peder Tuborgh, CEO of Arla Foods.
To succeed in China, Arla knows better than to do it alone. Arla now has a partnership with China’s Mengniu Dairy, one of the country’s leading dairy product manufacturers.
Arla currently has a milk pool of about 25 billion liters a year, which is larger than the annual supply of many dairy countries.
“This is one trait that makes us attractive from a commercial point of view for a Chinese company like Mengniu,” Tuborgh said. Mengniu’s contribution to the partnership is market knowledge and guidance, he said.
“We have high-quality raw materials to bring to the market – this could somehow meet the demand of the import-driven market,” Tuborgh said.
Arla is also looking at innovative ways to pique the interest of Chinese consumers in its imported products, such as milk powder, organic products and cheese.
“We cannot just duplicate what we do in Europe,” said Tuborgh.
“We must formulate our local products so that they suit Chinese preferences. I’m looking forward to later this year. It will be a very busy time for us, during which we will introduce a lot of new products to the market together with Mengniu.”
Indeed, through its partnership with Mengniu, Tuborgh is confident that Arla has the elements in place for a solid and growth-driven presence in China.
“There will be a trial-and-error phase, and that’s where we are now. It’s going to take a lot of time and resources over the next few years, but the plan is crystal clear. Neither one of us could be successful by ourselves,” he said.