FrieslandCampina to invest $123.7m to expand production, sales channels

Dutch global dairy giant Royal FrieslandCampina plans to invest 100 million euros ($123.7 million) in the China market this year, its CEO Hein Schumacher said in Beijing.

The investment will be used to expand the production and sales channels of Friso, the company's high-end infant and toddler formula brand, and further expand its sales in smaller Chinese cities, as it projected that about 50 percent of the future growth in China will come from third to sixth-tier cities, according to the company.

"We are bullish and committed to the long-term growth of the dairy market in China, and will continue to contribute significantly to Sino-Dutch bilateral trade. We will make additional smaller investments in the country in the next few years," said Schumacher, who visited China this week along with the Dutch Prime Minister Mark Rutte.

"Meanwhile, we will use the investment to increase our efforts in the catering sector. Milk is playing an increasingly important role in the coffee and tea business, and that will be an important future growth point for us," he said.

FrieslandCampina, one of the five largest global dairy firms, has been operating in the Chinese mainland for a decade, and now has business in more than 120 cities across China.

In 2017, the Dutch dairy producer sold between 20,000 and 30,000 metric tons of Friso and Friso Prestige infant and toddler formula in China. This year, it aims to sell more than 30,000 tons of the products, and it plans to launch more new consumer dairy products such as cheese.

In February, FrieslandCampina acquired all the remaining shares of Friesland Huishan Dairy, which was set up in 2015 as a joint venture for the production and sales of locally-sourced infant milk formula, tea creamers and coffee creamers.

The company is now fully owned by FrieslandCampina. The Dutch firm said it is restructuring its business and plans to increase the capacity of the Friesland Huishan Dairy plant, which is located near Shenyang in Liaoning province, and it is confident in the growth potential of the company.

Annual per capita consumption of dairy products in China is around 36 kilograms a year, while the figure is around 50 kg in Japan and South Korea. Industry experts said China's dairy market is expected to continue to grow significantly.

"Smaller cities and rural areas in China are far from the level of dairy consumption they should have. Their consumption of milk and other dairy products should keep growing and help to boost the total consumption," said Zhang Liebing, associate professor at China Agricultural University.