China is the new land of opportunity in a myriad of ways, and the dairy industry is no exception. There are at least two interesting points emphasizing the fact that China today is the place to be if you are a western company involved in the dairy business.
Point one, the consumption of dairy products in China is soaring, big time. Although still practically nonexistent just fifteen or twenty years ago, the market has been growing at an impressive rate, with products such as milk, yoghurt, ice cream, and Starbucks lattes becoming more and more universally consumed.
With the staggering population of nearly 1.4 billion, even a slight growth in the per capita consumption of anything in China will result in the dramatic increase of the overall production volumes. The growth of the dairy industry, however, has not been merely slight in a long time.
“The demand for and production of dairy products in China is growing faster than the country’s GDP,” says Mika Peltonen, General Manager of Teknikum‘s subsidiary located in Suzhou, China. “During the previous decade, some Chinese dairy manufacturers even grew with an annual rate of hundreds of percent.”
Point two, owing to a number of unfortunate incidents in the past few years, the safety of dairy products has emerged as an issue in China. Consumers are becoming more demanding, while laws and regulations have become increasingly strict to ensure the processing of safe, high-quality dairy products.
As a result of these developments, dairy producers are looking for ways not only to increase their production, but also to make production more safe and reliable. Achieving these goals is a question of both competitive advantage and reputation: in such an enormous market, nobody wants to “lose face”.
Teknikum’s brand of milk liners known as Finnliner is expected to become a hit in the Chinese dairy market. (Image courtesy of Teknikum)
Western Standards, Chinese Scale
Teknikum has been doing business in China since 2008, when the company established a subsidiary in the city of Suzhou near Shanghai.
Today, the leading Nordic polymer technology group employs approximately fifty people in China. With a turnover of around €2 million in 2015, the subsidiary’s business has been growing steadily. It now looks like the big breakthrough is on the horizon.
“We have been actively promoting our products and looking for new customers,” Sales Director Kari Alenius points out. “This year, it looks like we have big projects heading our way. If we land these contracts, our unit in China could double its turnover in 2016.”
Several of these projects are closely connected to the dairy industry. Originally, Teknikum took its first steps into China’s dairy business in 2013 when Yili, the largest dairy manufacturer in the country, wanted to update its processes and began to use Teknikum’s FOOD-TEK industrial milk hoses.
“The hose has had a stable position in that company ever since, and the user experiences have been very positive,” says Peltonen. “Now more large companies, most of which are located in northern China, are testing our milk hoses in their processes.”
In addition, Teknikum is about to launch another product for the Chinese market. Featuring a highly competitive FDA-approved compound developed in Teknikum’s own compounding factory in Kerava, Finland, the brand of milk liners known as Finnliner is expected to become a success.
In terms of both milk hoses and milk liners, Teknikum aims to become the market leader in China and achieve a market share of 40% or above by 2018. Considering the demand and Teknikum’s profound experience in the field, this goal is definitely within reach.
“Owing to the food scandals of the recent past, the demand for pure, high-quality milk is enormous in China,” Alenius points out. “Being a western supplier gives us the upper hand. We bring the materials from Europe, guaranteeing European standards of quality control in the process. Then we produce the final products locally in Suzhou, which gives us the ability to provide fast deliveries and service to locations in China.”
Needless to say, the number of companies involved in the dairy industry in China is huge. Considering the size of the market, it is hardly surprising that some of the individual companies are quite enormous as well.
“I recently saw a newscast about the largest dairy farm in Finland, with about 600 milk cows,” Alenius recalls. “To give you a sense of the scope of the Chinese dairy industry, consider the farm I once visited in Inner Mongolia. They had 1,500 milk cows there, and they still considered the farm only average in size. I was already impressed, but when the owner told me he had a hundred farms just like that one, my jaw really fell to the floor!”
Through painstaking work over the past few years, Teknikum has managed to become noticed in China. The Finns have recently been in talks with some of the biggest dairy manufacturers in the country, and the expectations for the Year of the Monkey are higher than ever.
Text by Industrial PRIME
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