Arla Foods secures HK$2.2b stake in Mengniu

At the signing ceremony, Ning Gaoning (left), Chairman of the COFCO Group and Chairman of the Mengniu BOD shakes hands with Peder Tuborgh, Arla CEO. [Photo provided to chinadaily.com.cn]

On the afternoon of June 15, senior management of Arla Foods, Mengniu, and COFCO came together to sign a cooperation agreement. Front row (left to right) Peder Tuborgh, Arla CEO, Sun Yiping, president of Mengniu, Ning Gaoning, chairman of the COFCO Group. In the back row Mette Gjerskov, minister of the Department of Foods, Agriculture and Fishery of Denmark, and Yang Gang, vice minister of the General Administration of Quality Supervision, Inspection and Quarantine witnessed this important and historic moment. [Photo provided to chinadaily.com.cn]

Arla Foods, a giant in the European dairy sector, has put up HK$2.2 billion ($284 million) for a 5.9 percent stake in Mengniu, China's largest producer of dairy goods, making it Mengniu's second largest strategic shareholder after the COFCO Group.

Mengniu Dairy and Arla Foods entered into a strategic cooperation agreement on June 15. The two companies also signed a series of joint agreements with the COFCO Group, China's largest grain, edible oils and food producer, on the day.

Arla Foods is the largest and longest-standing dairy producer in Europe as well as the world's largest organic dairy products supplier.

Peder Tuborgh, CEO of Arla Foods, noted that the alliance will benefit all parties, as China is the world's second largest dairy products market and the COFCO Group and Mengniu both have a sound understanding of the needs of the Chinese market and of Chinese consumers.

The collaboration will cover critical fields including front-end milk source management and production quality control so as to advance Mengniu's management.

Arla Foods will engage in a comprehensive partnership with Mengniu covering a range of areas, such as pasture management, the establishment of a quality traceability system, and product R&D, he added.

"Partnering with Arla Foods is an important step for Mengniu, especially in terms of conformity with global standards," said Sun Yiping, president of Mengniu.

Ning Gaoning, chairman of the COFCO Group, said, "As Mengniu's largest strategic shareholder, COFCO fully supports Mengniu's global partnership strategy. In the medium and long term, it will serve as an ideal model for the Chinese dairy industry."

The European company will become operationally involved in Mengniu in a number of ways, such as introducing a Danish management team, implementing Arlagaaden Quality Management System, improving the expertise of Mengniu, guiding Mengniu in further improvements to the pasture and production HACCP quality system, introducing new technology to improve the product capacity of each cow, and forming specialized pasture management teams.

During the three-party signing ceremony of the largest global collaboration for the Chinese dairy industry, Yang Gang, vice minister of the General Administration of Quality Supervision, Inspection and Quarantine said, "The establishment of the Sino-Danish Dairy Technology Cooperation Center will help the Chinese dairy industry to catch up and keep pace with global standards in terms of milk source management and quality assurance, and it will give rise to a comprehensive upgrade in the structure of the entire industry."