Danish-Swedish dairy firm Arla Foods has said it has signed a joint venture for the production of milk powder in consumer packs for the Chinese market with China Mengniu Dairy Company.

With effect from 1 October 2005, Arla Foods and the Chinese dairy company will set up a joint venture in which Arla has a 49% stake and Mengniu owns 51%.

"The move into the Chinese market is an excellent example of a combination of export and local production of retail packed milk powder," said CEO Peder Tuborgh, Arla Foods. "At the same time it is important for us to replace bulk production with several added value products for the benefit of our co-operative members."

As milk powder in consumer packs is a strategic core business for Arla Foods and as China is the world's largest market for consumer packed milk powder, Arla Foods said it has a natural interest in the potential within this market, which is showing clear signs of growth. The increasing imports of milk powder have been a further factor.

The joint venture will undertake local production of milk powder as well as distribution in consumer packs and will also handle imports and distribution of added value Scandinavian produced milk powder. The company is expected to gain a strong position in the Chinese market.