Nestle focuses on Chinese milk powder potential

By Neil Merrett

- Last updated on GMT

Related tags: Milk, Nestlé

Nestle today opened a state-of-the-art dairy plant in China as it
continues to tap growing demand for milk powder products in the
country.

The site, situated within Erguna in Inner Mongolia, will allow the group to exploit the local area's high-quality natural grasslands to step up production of its goods, the company said. Growing demand within the country for dairy products, particularly in innovative sectors like longer life milk and infant nutrition products, has resulted in continued consolidation from foreign companies looking to increase their market share. By expanding its processing capabilities, the move is expected to further cut costs and improve efficiency in the company's supply chain for raw milk, as costs for the product continue to rise across the globe. Along with improving its own operations, Nestle claims that the move will continue its focus on maintaining sustainability in the country's milk supply. Of the almost 40,000 Chinese farmers that supply milk to the company, each receives a regular income of around CHF 500,000 per day to achieve sustainable development, Nestle said. The company's strategy to increase milk processing in China comes as demand for dairy in the country has more than doubled over past five years, according to figures by financial services provider Rabobank. Though domestic milk production is growing rapidly, China is only able to produce 24 million tonnes in liquid milk equivalents of dairy products per year, the figures add. Although production of raw milk has been growing at a faster rate than demand recently, average consumption is still expected to increase to about 30kg per capita in 2015 from 20kg per capita currently. Consumers are also moving from milk powder to UHT milk as they become more brand conscious due to quality and food safety fears, according to the bank.

Related topics: Markets, Nestlé, Fresh Milk

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