Recently, a document concerning the trading plan between Mengniu and Arla has been issued officially by the Chinese Antimonopoly Bureau of State Administration for Market Regulation. As it is scheduled in the plan, the both parties will establish a business joint venture. In addition, the joint venture will acquire all equity of Inner Mongolia Mengniu cheese Co., Ltd., a cheese subsidiary of Mengniu. This cooperation means that Mengniu is going to put all of its cheese business into the new joint venture. Arla and Mengniu will work mutually for the brand Arla Foods, which will be operated by the joint venture.
The new joint venture seen as further extension for cheese business between Mengniu and Arla based on earlier cooperation
Earlier in 2019, Arla and Mengniu already established a joint venture especially for cheese business. The recent cooperation is considered as another extension for the cheese business in order to complete the integrated cooperation from the manufacture to the terminal sales.
According to Mengniu, the product lines of the new cheese joint venture vary from cheese for kids, cheese as snacks, and table cheese to high-end cheese products. The main brands are Arla Foods, Castello and Lurpak.
China ranks first in world’s CAGR despite small cheese market
It is analysed in the statistics released by Mintel that China has the highest CAGR (Compound Annual Growth Rate) over the last five years in the world despite the small cheese market in the country. On the contrary, European countries that have a mature cheese market, such as the UK, Spain, Belgium, Switzerland, Finland and Italy, have slight difference in the growth for recent years.
Arla’s technology and Mengniu’s marketing capability to be used fully in the new joint venture
The two dairy giants, Mengniu and Arla, make full use of their own advantages in the joint venture.
Arla provides mainly the advanced technology for the production of cheese and the strong research and development capability in the field of cheese. In the meanwhile, Mengniu plays an important role in marketing and promotion in China. Its wide-ranging distribution channels can be a very profitable resource.
Arla considered as the second biggest strategic shareholder of Mengniu with long term cooperation
About 8 years ago Arla already started to become one of the key strategic partners of Mengniu. In 2012, the two parties signed a strategic cooperation agreement in Denmark. Since then, Arla bought 5.9% of shares in Mengniu, making itself as the second biggest strategic shareholder of the Chinese dairy giant.
Mengniu has taken it as an opportunity to develop itself to an international advanced level in the management of dairy. As the second largest strategic shareholder, Arla takes part in the actual operation of Mengniu, such as introducing the management system of ranch from Denmark into Mengniu, sending groups of experts to work together with Mengniu teams, introducing new technology to improve the production of milk and so on. Thanks to the long term cooperation, the two dairy giants integrate themselves successfully into the international advanced dairy management, varying from the milk source to the production and quality control.
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