Dairy firm of­fers prod­ucts that suit lo­cal pref­er­ences, sees op­por­tu­ni­ties every­where

China Daily (Hong Kong) - - BUSINESS - By ZHONG NAN zhong­nan@chi­nadaily.com.cn

China Meng­niu Dairy Co Ltd, one of the coun­try’s big­gest dairy pro­duc­ers by rev­enue, plans to launch more prod­ucts to suit lo­cal pref­er­ences in Canada and In­done­sia this year, its top ex­ec­u­tive said.

Such busi­ness ex­pan­sion op­por­tu­ni­ties are aris­ing from China’s grow­ing trade with coun­tries and re­gions par­tic­i­pat­ing in the Belt and Road Ini­tia­tive over the past four years, es­pe­cially in fast-grow­ing mar­kets such as In­dia and South­east Asia.

The Belt and Road Ini­tia­tive, com­pris­ing the Silk Road Eco­nomic Belt and the 21st Cen­tury Mar­itime Silk Road, aims to build a trade and in­fra­struc­ture net­work con­nect­ing Asia with Eu­rope and Africa along an­cient trade routes.

Meng­niu, which is based in the In­ner Mon­go­lia au­ton­o­mous re­gion, will con­tinue to in­vest in tra­di­tional dairy pro­duc­tion bases such as New Zealand and Aus­tralia, as well as in the United States and Eu­ro­pean coun­tries to pro­duce qual­ity dairy re­sources.

Jef­frey Lu, chief ex­ec­u­tive of­fi­cer of Meng­niu, said the com­pany has also started to ad­just its strate­gies in China. It is build­ing three dig­i­tally en­abled plants for long-term growth and to serve as man­u­fac­tur­ing bases for ex­ports to coun­tries in Asia.

In line with China’s in­dus­trial and con­sump­tion up­grad­ing boom on the back of the Made in China 2025 ini­tia­tive, Meng­niu in­vested in a dig­i­tally en­abled plant in Jin­hua of East China’s Zhe­jiang prov­ince. The aim is to ship more dairy prod­ucts to South­east Asian mar­kets through the 21st Cen­tury Mar­itime Silk Road.

Last year, Meng­niu signed a co­op­er­a­tion agree­ment with the Ti­bet au­ton­o­mous re­gion for joint ef­forts to build a mod­ern pas­ture and a dairy fac­tory. The part­ner­ship is ex­pected to boost Meng­niu’s rev­enue.

The com­pany plans to take ad­van­tage of Ti­bet’s unique en­vi­ron­ment and re­sources to cre­ate pure and healthy dairy prod­ucts to serve lo­cal con­sumers and also cover South Asian mar­kets such as Nepal and In­dia.

Some 1,500 cows have been raised in the pas­ture to date. The plan is to set up a pro­duc­tion fa­cil­ity with an­nual ca­pac­ity of 50,000 met­ric tons af­ter the first-phase fac­tory is com­pleted in its neigh­bor­hood.

“En­cour­ag­ing dairy con­sump­tion is a re­flec­tion of eco­nomic suc­cess in many mar­kets re­lated to the Belt and Road Ini­tia­tive. The types of foods peo­ple eat now in­clude health food and con­ve­nient food,” said Lu.

“I think it’s a com­bi­na­tion of qual­ity and in­no­va­tion that is linked to growth and de­mand. Those two fac­tors came to­gether to cre­ate a big mar­ket,” said Lu. “The big­gest op­por­tu­nity for us is the closer con­nec­tion with con­sumers in the Belt and Road mar­kets as well as in the home mar­ket.”

To date, Meng­niu’s prod­ucts have en­tered mar­kets in­clud­ing Hong Kong, Ma­cao, Mon­go­lia, Sin­ga­pore and Myan­mar. Its port­fo­lio ranges from reg­u­lar-tem­per­a­ture prod­ucts to low-tem­per­a­ture and frozen prod­ucts.

It has also formed part­ner­ships with sup­pli­ers in Canada and In­done­sia this year.

Ac­cord­ing to Meng­niu’s 2016 fi­nan­cial re­port, rev­enue grew 9.7 per­cent year-on-year to 53.8 bil­lion yuan ($7.9 bil­lion.

“Go­ing over­seas al­ways brings chal­lenges, par­tic­u­larly from a cul­tural per­spec­tive. Run­ning a busi­ness in less fa­mil­iar economies re­quires us to know the lo­cal cul­ture, work with the lo­cals, gain a thor­ough un­der­stand­ing of the le­gal en­vi­ron­ment, reg­u­la­tions and laws,” said Lu.

“We de­vel­oped new prod­ucts to meet the pref­er­ences of lo­cal con­sumers in Hong Kong, Ma­cao and In­done­sia. In New Zealand, 80 per­cent of our staff are lo­cals,” he said. “Af­ter we ac­quired a large com­pany in Aus­tralia in 2016, we re­tained 95 per­cent of their lo­cal em­ploy­ees.”

Meng­niu is also the largest share­holder of An­hui-based Mod­ern Farm­ing, show­ing the do­mes­tic dairy gi­ant’s shift to pas­teur­ized milk and other low-tem­per­a­ture dairy prod­ucts to get ahead of its in­ter­na­tional ri­vals.

Mod­ern Farm­ing is the coun­try’s lead­ing farm com­pany, with the largest num­ber of cat­tle. It is also a lead­ing provider of raw milk. The com­pany op­er­ates 27 farms with over 220,000 cows. This move will al­low Mod­ern Farm­ing to pro­duce pas­teur­ized milk, yo­gurt and pure milk.

To en­sure prod­uct safety, Meng­niu has been work­ing with Ger­many’s Siemens AG to build an in­ter­net-based sys­tem that is able to gen­er­ate over 400,000 pieces of qual­i­ta­tive data a day.

Li Gang, vice-pres­i­dent of the Chi­nese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion in Bei­jing, said: “Learn­ing from ex­pe­ri­ence in over­seas mar­kets and gain­ing ad­vanced in­dus­trial tech­nol­ogy will help Chi­nese dairy pro­duc­ers se­cure mar­ket share and fur­ther com­pete with for­eign com­pa­nies. So, they should keep diver­si­fy­ing their distri­bu­tion chan­nels and prod­uct port­fo­lios in global mar­kets.”

with an au­to­matic milk­ing equip­ment in Heng­shui, He­bei prov­ince.

PRO­VIDED TO CHINA DAILY

A work­shop of Meng­niu in Helin, the In­ner Mon­go­lia au­ton­o­mous re­gion.

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