Dutch co-operative FrieslandCampina is to build a new dairy plant in Indonesia, described as one of its “largest and fastest-growing markets”.

The planned facility in Jakarta will be run by the company’s Frisian Flag Indonesia business, with construction expected to start in April next year. The plant will produce condensed and pasteurised milk, with an initial capacity in excess of 500 million kilos and with room for expansion.

Meanwhile, FrieslandCampina said its condensed and pasteurised milk plant in Pasar Rebo, east Jakarta, will be converted over to infant formula for the Asian market.

FrieslandCampina said in a statement it is investing a total of EUR250m (US$292.6m) in the two projects, both of which are expected to be completed in the first six months of 2024.

CEO Hein Schumacher said: “This expansion will allow us to provide even more people in Indonesia with our nutritious dairy products in the future. The construction of a new production site will allow us to continue to grow and contribute to the development of the Indonesian economy and dairy sector.”

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By GlobalData

Frisian Flag, or Susu Bendera as it is known locally, has been operating in Indonesia for almost a century and employs around 3,000 people.

Separately, FrieslandCampina provided an update on the current trading environment around Covid-19, which it said caused a “drastic” drop in milk and dairy prices in March and April, and while they have since recovered they are still below pre-pandemic levels.

“This has led to difficult market conditions” for the Dairy Essentials business group, the company said, an added-value division and also a manufacturer of basic dairy products such as butter and cheese.

And the second coronavirus wave that is now hitting many countries will have a further “negative” impact on the dairy firm’s foodservice business, which was “severely impacted” by the virus in the second quarter and is “still suffering the effects”, despite an element of recovery in June and July.

In Hong Kong, a gateway into China for FrieslandCampina, the pandemic and social unrest have led to “difficult market conditions”, particularly for infant formula, resulting in an emphasis on e-commerce to reach out to consumers. The co-op now expects its financial results in Hong Kong to be “substantially impacted” in the second half of its fiscal year.