These “handheld” works of art offer consumers an immersive experience, all while enjoying a nutritious milk drink, the companies say.

Tetra Pak Custom Printing is the first digital inkjet-based printing method in the carton packaging industry that is unrestricted by physical printing plates. It allows for over 30 designs on a single packaging material reel, and can produce limited ranges or commemorative editions of their products in an agile way. The solution also gives F&B players the ability to quickly activate marketing efforts and capitalise on consumer trends.

Xiaoyan He, senior brand manager of Milk Deluxe, comments, “Our collaboration with Meet You Museum, exploiting the potential of this solution, is helping Chinese consumers to enjoy timeless pieces of art from Vincent Van Gogh and Claude Monet on a daily basis.”

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To submit a news item for inclusion, please contact Suzanne Christiansen at suzanne@bellpublishing.com or Maddy Barron at maddy@bellpublishing.com.

• Gerhard Schubert GmbH to present at Fachpack 2024 in Nürnberg
• 2024 IDF Dairy Innovation Awards finalists announced
• Tetra Pak names Andersson as the new managing director for North Europe
• Mengniu launches limited edition range in Tetra Pak

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The instant milk formula (IMF) category was among the hardest hit by the scandal, but over the past year, the efforts of local companies such as Mengniu to regain consumer trust has paid off: sales growth of domestic IMF brands is now outpacing that of imported brands.

With the domestic market shored up, the goal of Chinese dairy majors is to take on the international dairy market. The first step in this plan is Southeast Asia where Mengniu exports its dairy products to Myanmar, Singapore and Malaysia. In Indonesia, Mengniu has built a dedicated dairy production facility and started selling dairy products under the YoyiC brand at the end of 2018.

Access to sources of high quality milk are necessary to fuel this expansion, and this is a key motivator for the recent Australian acquisitions. Another benefit of the LD&D deal for Mengniu is that its newly acquired brands, such as Farmers Union and Berri, already have a long history in Southeast Asia. Mengniu can build upon consumer familiarity with these brands to further enrich the product lineup in the region.

What’s next?

Mengniu can also transform itself into a more dynamic and diverse company that can cater to changing consumer tastes and preferences – not just in dairy, but also in other trending categories such as LD&D’s ready-to-drink (RTD) coffee and juice. In China, Mengniu is diversifying its products beyond dairy and made an entry into RTD coffee with the launch of Shiny Meadow Cold Brew Coffee Latte in September 2019.

Finally, while Mengniu is gradually expanding its reach globally via South East Asia, its ultimate goal is to become a truly international company. Reflecting this strategy, and how long term their vision is, in June 2019, Mengniu Dairy partnered with Coca-Cola and signed a US$3billion deal to sponsor the Olympic Games until to 2032.

Source: Mintel

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Dairy Farmers of America (DFA) topped the list in 2018, taking in 29.2 million tonnes of milk, or 3.5% of the total market share. The top three leaders – DFA, Fonterra and Lactalis – remained stable in their positions compared to the previous ranking in 2016.Arla, Nestlé and Friesland Campina were numbers four, five and six, with milk intake of 14 million tonnes each.

Saputo increased its intake by about 2.1 million tonnes milk through the acquisition of the Australian company Murray Goulburn.

Amul from India is a new entry in the 2018 top 10, in 9th place (up from 13th) with 9.3 million tonnes. This shift was driven by growing milk intake and the fact that IFCN decided to standardise milk intake from natural content to 4% fat and 3.3% protein.

Two big Chinese milk processors, Yili Group and Mengniu showed an increase in milk intake by about one million tonnes since 2016’s rankings, together taking 13.6 million tonnes of milk.

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The new product line is said to have a higher protein content, better taste and more visual appeal on shelves thanks to a refreshed look.

Tina Zheng, operational marketing director at Tetra Pak China, says, “We took a collaborative approach with Mengniu, starting with understanding their needs and assessing market opportunities. Our studies show that millennials are increasingly buying small portions and drinking on-the-go. With an octagonal shape that fits comfortably in the hands, a large resealable opening and the metallic effect, the Tetra Prisma Aseptic Edge 250ml package came out as the best choice.

“However, it’s not just about the package: we tapped into our expertise in all aspects of product development, introducing micro filtration to boost the protein content and direct heating technologies to improve the product taste. The result is a product that gives the consumer a complete premium product experience, from the milk inside to the package outside.”

James Song, head of brand management at Mengniu, says, “Our Milk Deluxe brand was launched in 2005 as the first premium milk in China. After many years of success, we felt we needed to revitalise our brand to be ahead of market trends and stay relevant with the new generation of consumers who expect greater convenience and a better drinking experience.

“With support from Tetra Pak throughout the whole process of product development, the new organic milk hit the market in June 2018 and was immediately popular. We expect monthly sales to reach over 100 million RMB (€12.5m) in August, and we will add three more production lines quickly.”

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Dairy price recovery in 2016 came too late to be reflected in the combined turnover of the top 20 companies, which, in 2016, was down 1.6% on the year—but down a dramatic 14.4% in US dollar terms since 2014 (-1.3% and +2.7%, respectively, in euro terms), due to the significant reduction in milk values which has occurred over the period and the weakened world market demand.

There are no new entrants into the list this year, with the €4 billion threshold difficult to achieve. However, while the players have remained the same, the order has moved compared to 12 months prior.

Nestlé remains at the top of the list, upheld by its ice cream JV with R&R (now named Froneri), which has offset slow growth elsewhere. Danone has moved into the second spot, having acquired WhiteWave Foods. This enables Danone to leapfrog Lactalis, who- despite making acquisitions in Romania, Belarus, China, Chile, and the US- moves to the third place on the list. With the pending acquisitions of Danone’s Stonyfield business in the US and Omira in Germany, Lactalis is likely to move up again in next year’s ranking. The acquisition of a 51% share in Pakistan’s Engro Foods has allowed FrieslandCampina to move into fifth place, slightly ahead of Fonterra who move to sixth.

Dean Foods has dropped out of the top 10 in a year that saw continued decline in the US fluid milk category, and saw the company investing in dairy alternatives and juice. This allowed Mengniu to become the second top 10 Chinese company, helped by consolidating its share of Burra Foods in Australia and acquiring a majority stake in China Modern Dairies who also produces liquid milk. However, the two Chinese players in the top 10 showed a combined sales growth of 0% YOY in 2016 in dollar terms, compared to 3% in 2015 and 14% in 2014, and they will perhaps need to look outside of China to continue their movement up the list in future years.

The largest M&A deal in the sector this year was the acquisition of Mead Johnson by Reckitt Benckiser, who previously had no footprint in dairy. While there were only a total of 73 deals in dairy in 2016, at the halfway point in 2017, the number is already up to 50, with half of these in Europe.

It is expected that the dairy sector will see organic growth return, with growing milk supply in the north-eastern US. There will also be growth from acquisitions with increased M&A. At the same time, mitigation of risk is likely to become a major driver for events, as companies will consider their position in the light of future risks caused by Brexit, potential and announced changes to trade agreements, and further changes to environmental and food safety regulations around the globe.

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Advertising is ubiquitous in China, with screens in elevators blaring out adverts for food products, real estate, cosmetics and more. The Chinese advertising market was worth US$70 billion (€62.7bn) last year, according to US management consulting firm McKinsey & Co.

The dairy sector has long been one of the biggest spenders on ads, with giant billboards for leading local firms such as the China Mengniu Dairy and Inner Mongolia Yili Industrial Group hanging over major arteries, such as Beijing’s third ring road through the business district. The battle for sales between Mengniu and Yili has also meant brisk advertising business for China’s Central TV (CCTV) and regional channels. Together, the two dairy firms spent over US$600 million (€537.7m) in 2014 on advertising, according to McKinsey.

New guidelines

Crucially, for the first time the new law (which is an amendment of an earlier advertising law issued in 1994) gives a clear definition of false advertising and updates the law to reflect the huge growth of online commerce in China over the past decade. The new law features a ban on advertisements on mass media and public premises for baby dairy products, drinks and other baby food, which claim to serve as a substitute for breast milk.

However, China’s leading dairy brands appear perplexed by the law. “The law is not affecting big brands like ours, much because we are already complying. But it’s hurting the smaller brands that sometimes use exaggerated claims to get sales,” explains Mr Sun, an executive at Mengniu’s Beijing distribution centre. “Chinese dairy firms are able to capitalise on market share. That’s the whole idea behind the law, to give consumers more confidence to buy Chinese dairy products,” Sun notes, who also helps coordinate Mengniu’s in-store advertising in retail outlets in Beijing.

That’s perhaps an optimistic take, but the new advertising law is indeed one of a flood of legislation introduced by the Chinese government aiming to encourage consumers to buy locally-made products, rather than the imported goods they now purchase for perceived better quality. Other recent laws put the onus on retailers to prevent the sale of counterfeit goods. Another law curbs the collection and use of consumer data by retailers, and a new food safety law seeks to reassure consumers buying Chinese products.

False advertising

The advertising rule also holds retailers accountable for false advertising and now explicitly covers online advertising, according to Huang Xinmin, deputy director general of the department of advertisement, supervision and management at the State Administration for Industry and Commerce (SAIC), the state agency overseeing the legislation. “One major change to the amended law is that celebrities or other endorsers endorsing a product or service may be held liable if they know, or ought to know that the advertisement amounts to false advertising,” Huang says. The law provides for a three-year ban on engaging endorsers who fall foul of the amended law, she adds.

This rule could be significant for Yili, which engages actress-singer Faye Wong to endorse its Satine brand, which it has positioned to overtake Milk Deluxe, and which provides the bulk of revenues for Mengniu. It hires several celebrities, including musician Jay Chou, to endorse its products.

Under the law, endorsers have to be users of the products themselves. How this will be proven, however, has not been set out, Huang says, who also explains how the law prohibits the advertising of foods and drugs in the guise of ‘health information’ programmes or columns.

For the dairy sector, competition is sharpened by awareness that theirs is far from a mature market. The value of imported milk products grew 12.9 per cent in 2014, compared to a 8.9 per cent rise in 2013. Chinese consumers spend US$78 (€69.90) per year on dairy products, whereas the South Korean average is US$152 (€136.25), according to Kantar Worldpanel.

Marketing strategies are complex, as they are increasingly multi-channel, and the law will now force brands to be more careful about how to educate consumers. They will almost certainly have to certify and test the nutritional count (calcium, vitamins, etc.) on dairy products like yogurt or cheese, but the identity of the regulator is unclear.

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Valeur worked at Arla for nearly 30 years apart from six years spent in jobs outside the company. He rejoined Arla in 2000 and held management positions within Arla subsidaries, Arla Foods ingredients and Mengniu Arla in China, and has held his current position since 2007.

Peder Tuborgh, CEO of Arla Foods, says, “Jais has driven a big change agenda within our categories and operations and as a leader he has taken Arla a big step forward in innovation, category development and at the same time been able to develop a streamlined operations organsation. I am sorry to see him go as a colleague in the executive management team and as a leader who lives the global mindset that we value in our leadership. I am also proud on Jais’ behalf that he has been offered this role and I wish him all the best.”

Valuer adds, “My years in Arla have been fantastic and I have been lucky to be part of this great company and heading up a team of inspirational leaders. However, the opportunity for me to join Danish Crown and be part of their development was too good to turn down and I believe I will be able to make a difference.”

He will leave Arla by mid November this year.

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“In close cooperation with our partner Mengniu, we have developed our market in China. We have gained important experience and insight, which will be levers to accelerate our expansion in Asia. We have strengthened our presence in several SEA countries and it’s time to move the senior management and main leadership functions to the region,” says executive vice president Finn Hansen, head of Arla Foods’ business group, Consumer International.

The new Business Unit Asia management will be based in a regional office in Kuala Lumpur and will be setting the strategy for all retail and food service activities in Asia. The unit will cover the Chinese retail sales through the partnership with Mengniu Dairy China as well as the SEA market. During 2014, Arla has established or strengthened the country management in Bangladesh, Indonesia, Myanmar and Philippines, and these as well as the management in Japan and South Korea and distributor sales in SEA will all report to the regional office.

Jesper Colding has appointed as senior vice president as of 1 March to head Arla’s Business Unit Asia. Colding is currently holding a position in the executive management of Mengniu Dairy China as vice president for Marketing. From 2009 to 2012, Jesper Colding was senior vice president in Global Categories in Arla with responsibility for cheese and the BSM category. Earlier in his career, he was based in Malaysia as associate director in P&G with sales and marketing responsibility for Malaysia and Singapore.

Current head of Arla’s Business Unit China, Frede Juulsen, will take up a new role in Arla, which includes responsibility for TPM (Third Party Manufacturing), global infant milk formula and the supply chain in Consumer International.

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Since 1986, Arla has been in a 50/50 joint venture with Vigor under the name Dan Vigor. In 2013, Dan Vigor made a gross revenue of €36 million. Under the new agreement Arla will exchange the joint ownership of Dan Vigor for an eight per cent share ownership of Vigor, Brazil’s largest dairy company. Arla will become a voting member and an observer in Vigor’s board of directors.

“The new agreement with Vigor is similar to the one we have with Mengniu in China – only this time it hasn’t been necessary for us to find additional funding. Vigor is one of Brazil’s leading dairy producers with a first class distribution network. We have a history of excellent cooperation and it’s a natural step for us to further build on this partnership to explore the great potential in Brazil,” says Finn Hansen, head of Arla’s international markets.

Brazil is not only the most significant market in the region, but also the world’s fourth largest dairy market with an overall annual growth of five per cent. With a population of 200 million and a growing middle class, Brazil holds significant dairy consumption potential. Arla’s ambition is to accelerate its export of products to Brazil to get a share of the growing demand for imported brands in the dairy market, the co-operative says.

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Since 2013 major dairy production companies have been building up alliances and working together with dairy farmers to boost growth in the Chinese dairy industry. In May last year, for example, Mengniu and Danone signed a framework agreement to establish a joint venture for the production and supply of chilled yogurt products. At the same time Mengniu increased its stake in China Modern Dairy to 28%. Yili Group also formed an alliance with the Italian dairy firm, Sterilgarda Alimenti, and signed a memorandum of understanding with Dairy Farmers of America regarding strategic purchasing and farming service cooperation.

Significant investment, however, is not the only reason why the Chinese drinking yoghurt market is growing rapidly: With increasing disposable income and exposure to the highly marketed benefits of drinking yogurt, more and more consumers demand healthier, nutritious dairy drinks in China. According to Canadean, the ambient drinking yogurt segment is doing particularly well: in 2013 ambient drinking yogurt grew by an impressive 110%, and it is expected to grow further in 2014, to take a 70% of the drinking yogurt market. Loubser says: “Consumption habits have shifted, and a significant portion of the market is now ‘on the go’ which makes yogurt drinks, especially ambient variants, very convenient for busy consumers.”

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“Once again, giants Nestlé, Danone and Lactalis top the list, showing that the world’s largest dairy companies are reasonably entrenched,”  Rabobank analyst Tim Hunt says. “We continue to see some companies outperform their peers in sheer growth terms. In particular, the Chinese giants Yili and Mengniu, which saw their sales expand by 14% and 20% respectively, with Yili entering the top 10 for the first time ever.”

Saputo continued its march up the list to push to eighth place, in part due to several recent acquisitions. Meiji and Morinaga slipped down the list largely due to the sharp decline in the value of the Yen (in which most of their products are sold).

2013 was a challenging year for most of the world’s major dairy companies, with stagnant sales volumes in most OECD dairy markets. Acquisitions have become a more attractive route to grow sales and in 2013, there were 124 dairy transactions, up from 111 in 2012 and the highest since 2007.

Positioning for maximum effectiveness in the expanding Chinese market remains prominent. In 2013, joint ventures were announced between Mengniu and Whitewave and COFCO and Danone, while Yili announced a partnership agreement with Dairy Farmers of America. Mengniu took a stake in China Modern Dairy to secure raw milk supply. A further joint venture is pending between FrieslandCampina and Huishan.

Despite the increase in transactions, the dairy sector saw no billion dollar deals in the 12 months to 30 June 2014.

“The catch is that the number of attractive targets is shrinking and multiples have risen”, explains Hunt. “With billion dollar value deals harder to come by, dairy giants will need to acquire or tie up with more companies than in the past to sustain the same rates of growth.”

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Running at a speed of 24,000 packs per hour, or approximately seven packs per second, the machine is one of the world’s fastest filling machine for carton packages, pushing operational cost down by as much as 35%, the company says.

Mengniu’s decision to purchase it in November 2012 was based on a successful field test and the need to respond to the rising demand for its premium flavoured milk, Latte. The company was running two filling machines at full capacity in 2012, delivering an annual output of 94 million packs, but was still not able to keep up with demand.

“Within ten months of installation, 100 million packages had been produced on a single line, and we were able to reduce the overall operational cost for Latte by 20% in comparison with low speed filling machines. Based on these results, we made the decision to order three more lines,” said Gao Jianjun, factory manager of Mengniu Dairy Plant in Ma’anshan City.

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The transaction makes Danone the second largest shareholder in Mengniu, and follows on from agreements signed on 20 May 2013 with Mengniu and with COFCO, China’s largest state-owned food company.

In parallel, COFCO, Danone and Arla — Mengniu’s three core shareholders —will combine their stakes (16.3%, 9.9% and 5.3%, respectively) within COFCO
Dairy Investments, a jointly-owned company pooling all three shareholders’ interests in the governance of Mengniu.

The transaction is subject to the approval of Mengniu’s shareholders, and is expected to be finalized within the next few months.

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