Arla intends to build on Mengniu interest, not invest elsewhere in China

16-Jan-2013 - Last updated on 16-Jan-2013 at 11:03 GMT

Arla Foods has no plans to acquire, merge or partner with any other Chinese dairy industry players under its recently-unveiled five-year strategy, a spokesperson for the Denmark-based co-operative has revealed.

Late last week, Arla announced the launch of its latest five-year growth plan - Strategy 2017. Under the plan, the company intends to increase its focus on growth markets such as Russia, China, and the Middle East and Africa region.

Arla expects revenue generated in these markets to increase to 10bn DKK ($1.77bn) by 2017, and intends to work alongside local dairy industry players to achieve this growth.

Speaking with DairyReporter.com, Arla Foods spokesperson Theis Brøgger revealed that the company has no intention of forming additional partnerships with Chinese dairy players. Instead it intends to build on its existing interest in China’s biggest dairy processor, Mengniu Dairy Company, he said.

“Build on” Mengniu deal

In June 2012, Arla entered into an agreement with COFCO Corporation to become an indirect shareholder of Mengniu. Through the deal, Arla was granted access to Mengniu’s extensive distribution channels in China.

“In China, as you may well know, we entered into an agreement with COFCO to become a shareholder of China’s biggest dairy, Mengniu. This obviously gives us a great window into China. We have access to the sales channels of the biggest dairy in the country,” said Brøgger.

“In China the deal has already been made. This is the part that we intend to build on in China.”

Arla does, however, hope to establish links with domestic dairy players in its other focus markets. It also intends to invest heavily in marketing and work to develop distribution channels in Russia and the Middle East and Africa region.

“Russia has high growth rates for Arla. The brands we have offered so far have been very well received in Russia. It is the same in the Middle East and Africa region,” said Brøgger.

“These three markets will be the centre of our attention for now,” he added.

Growth markets the “next frontier”

But, according to Brøgger, the new growth market focus does not mean it has abandoned the pursuit of growth in Europe – its core market.

Arla revealed that alongside its growth market focus, it intends to continue to strive to develop its European business – but though innovation and efficiency, not mergers and acquisitions.

“There will definitely not be a decrease in the attention paid to Europe. We have succeeded in securing our market position in Europe. We will continue to focus on these markets,” Brøgger added.

“But growth rates are much higher outside of Europe. This is the next frontier for us – to find new outlets for our milk and dairy products.”