Danish group Arla Foods has started construction of a new powdered milk production plant, to expand its presence in the China's dairy sector.
The new site, situated in Hohhot, will allow the group to quadruple its output of milk powder to 30,000 tonnes annually by the time it becomes operational in summer 2008. Hohhot is located in Inner Mongolia.
The announcement comes as the company, through its joint venture with local group Mengniu, seeks to capitalise on the growing demand in the country for instant milk and infant nutrition products.
Ulrik Sletten, production director of the joint venture, added that along with increasing output, the plant would also allow the company to improve the quality of its product. The plant will operate one of the country's largest and most advanced milk powder production lines.
"The new plant will be of a very high technological standard along the same lines as Arinco in Denmark and Vimmerby in Sweden," he said.
The revamping of the group's facilities will also allow the company to move its sales and administration offices to Beijing from Hohhot.
With Mengniu being one of the largest producers of milk and value-added products in the country, Arla is confident in its outlook for their partnership.
In its latest half year results published last September, Mengniu announced a strong sales surge of 39 per cent to CNY343.4 million (€33.7m) thanks to new value-added products and a greater share of the milk market.
The functional products also helped the group increase its share of the liquid milk market by three percentage points since December 2005 to 31.7 per cent in June 2006, according to AC Nielsen.
Strong growth in the market for dairy products is seen as one of the key drivers in the Chinese food industry, which recorded a profit last year of CNY126.3 billion, up by 29 per cent on 2005.
As such, an Arla spokesperson added that this growth reflected the company's growing interest in the Asian dairy market as a whole.
