FrieslandCampina sets lofty growth target in China

Dutch farming cooperative Royal FrieslandCampina NV, one of the five largest dairy companies in the world, is planning to increase its revenue from China to 2 billion euros ($2.2 billion) by 2020, according to a top company official.

The contribution from China would account for about 10 to 15 percent of the company's expected global revenue of 15 billion euros by then, said Roelof Joosten, chief executive officer of Royal FrieslandCampina.

China is currently FrieslandCampina's fastest-growing global market with expected sales of about 1 billion euros this year, roughly 10 percent of its total global revenue.

Of its total sales in China this year, in terms of value, roughly 60 percent came from sales of Friso child nutrition products, about 25 to 30 percent from supply of ingredients to major dairy and beverage manufacturers in China, and 10 percent from sales of dairy products including cheese and cream, according to James Chiu, president of FrieslandCampina China.

In terms of volume, about half of the revenue came from ingredients and the balance equally from infant formula and dairy product sales, he said.

Both Joosten and Chiu exuded confidence when asked about the growth in demand for dairy products in China. The annual dairy product consumption per capita in China is about 25 liters, while the figure in the Netherlands is 350 liters, said Joosten.

The Dutch dairy producer launched its ultra high temperature processed milk Friesche Vlag in China this year in 1-liter and 200-milliliter sizes, on JD.com, an e-commerce platform. Chiu said more than half of the UHT milk in China is purchased through e-commerce platforms.

The company's high-end infant and toddler formula brand Friso will be introduced in China by the end of this year. In addition, it will also bring to the market the second formula brand developed by its joint venture with Huishan Dairy next year, Chiu said.

According to Chiu, online platforms account for 25 percent of the total infant formula product sales.

On Sunday afternoon Joosten accompanied Dutch King Willem-Alexander and Queen Maxima to the Dutch Dairy Expertise Center in Shunyi district of Beijing, during the royal couple's state visit to China.

The Sino-Dutch Dairy Development Center and its subsidiary Dutch Dairy Expertise Center are initiatives pioneered by Royal FrieslandCampina, in an effort to improve the quality and safety standards of the Chinese dairy industry.

Founded in 1871, FrieslandCampina reported annual revenue of 11.3 billion euros last year.

It has more than 14,000 dairy farms in about 80 countries and regions including the Netherlands, Germany and Belgium.

Song Liang, a leading dairy analyst in China, said the sales target set by FrieslandCampina will make it one of the top dairy producers in the world by 2020.

But it all depends on how well they grow their market in emerging countries and regions where leading dairy companies like Yili and Nestle SA are competing fiercely.

Foreign dairy players have to develop their local operations and products in China by working with leading domestic peers, Song said.

According to Euromonitor International data regarding milk powder brands in 2014, Yili Inner Mongolia Industrial Group Co Ltd had the largest market share of 19.9 percent in China in 2014.

It was followed by China Mengniu Dairy Co Ltd with 14.4 percent, and Bright Food Group Co Ltd at 1.8 percent. Nestle SA was ranked sixth with 0.4 percent.