Arla Foods has announced a deal to supply Chinese infant formula company Biosteme.
The Nordic dairy giant will supply powder to Biosteme from a facility in Denmark for ten years. The deal could also see both companies finance upgrade work at the plant.
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Arla described Biosteme as a “premium provider of high-end pediatric nutritional baby care products in China”.
Jens Jorgen Hjortshoj, vice president of Arla’s B2B nutrition business unit, said: “This partnership with Biostime, a leading player in China’s premium infant nutrition market, clearly reinforces our confidence in the long-term development of the Chinese premium infant formula market.”
The deal, announced today (22 June), comes a week after Arla also said it would strengthen its ties in China with local dairy processor Mengniu.
Arla has worked with Mengniu in China since 2005 selling milk powder. The co-op, which will become a shareholder in Mengniu, plans to work with the firm to sell a wider range of products. Arla hopes the deal will multiply its sales in China by five and described it as a “breakthrough” for its namesake brand.
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By GlobalDataHowever, food safety remains a real concern in China. Mengniu has pledged to invest to shore up its supply chain but, earlier this year, it admitted producing milk containing excessive levels of a cancer-causing chemical. The products did not reach store shelves but it underlines the work Chinese companies need to do to improve quality and safety standards.
For all the apparent benefits of investing in China for Arla and for all the apparent work Mengniu is undertaking to shore up its supply chain, the investment is a risky one for the Danish-Swedish dairy group.
