Dutch dairy companies' quest for new growth pastures

The Dutch dairy sector is looking to double its turnover in exports to China in the near future, the country's dairy industry association chairman has said.

Cees 't Hart, who is also chief executive officer of Friesland Campina, a leading Dutch dairy cooperative, said the country's dairy sector is also hoping to share its expertise in the safety and tracking of products.

"We have appointed a CEO in the Greater China area. We want to broad our portfolio in China, and to double our turnover (in China)," he said at media briefing on Wednesday.

The Dutch cooperative has a yearly export volume of $1 billion to the Chinese market, which is only 5 percent of Friesland Campina's global export volume.

The increase in exports will be facilitated by the removal of a ceiling on dairy production in the European Union starting in 2015, and the yearly production of raw milk in the Netherlands is expected to increase by 2. 5 million tons.

Hart is also meeting with officials from the General Administration of Quality Supervision, Inspection and Quarantine on Wednesday.

Hart said the company will prioritize exports of UHT (ultra-high temperature processing) milk and cheese, which have a long shelf life, and which he believes has huge market potential in China.

"The middle class in China is increasing, the GDP is increasing, and the intake of dairy product is increasing as well," he said.

New Zealand remains the largest exporter of dairy products to China despite a contamination incident last August that triggered a recall. Meanwhile, the imports of dairy products from Europe, including the Netherlands, is growing incrementally, according to statistics from the General Administration of Customs.

According to Song Liang, a dairy industry analyst at the Distribution Productivity Promotion Center of China Commerce, Friesland Campina's expansion in China could be facilitated by the efforts of Chinese companies to diversify their milk sources.

"The trend is that Chinese companies are increasingly casting their eyes towards Europe, which is removing the ceiling on production," he said.

Hart said the company was encouraged by comments by President Xi Jinping during his visit to the Netherlands in March. Xi said China would encourage the imports of dairy products from the European country.

Meanwhile, the company has already taken a string of measures to consolidate its market presence in China.

Friesland Campina has been holding talks with Shenyang-based China Huishan Dairy Holdings on creating a joint venture to produce, market and sell infant formula.

It also has helped to establish the Sino-Dutch Dairy Development Center at the China Agricultural University together with Wageningen University in the Netherlands, which Hart hopes will further enhance the sharing of Dutch expertise in the dairy industry.

The company will reportedly invest 40 million yuan ($6.5 million) over the next three years in the development center. It also plans to build a farm in Beijing to enable more dairy farmers to learn the Dutch mode of dairy farming.

However, Song warned that it is unlikely that China will totally borrow the Netherlands system.

"In the Netherlands, dairy farms came before the milk plants, while in China it was the opposite. It is impossible to organize the Chinese dairy industry the way the Netherlands does," he said.