At the beginning of the Year of the Dragon, foreign-funded dairy companies handed over a commendable financial report. On February 21, a reporter from Beijing Business Daily learned that the 2023 performance report released by Dutch dairy giant FrieslandCampina recently showed that the revenue of the specialised nutrition business group dominated by Meso increased by 89% to 115.5 billion euros, with an operating profit increase of 3.5 billion5% to 20.7 billion euros; The financial report for the first half of the fiscal year 2023-2024 (ended December 31, 2023) disclosed by New Zealand dairy giant A2 Milk Company shows that the company's total revenue increased by 37%, and revenue in China and other Asian regions was 5NZ$49.5 billion, up 165%。Both foreign giants have highlighted their performance in the Chinese market.
Industry analysts pointed out that the gradual recovery of the market share of foreign brands is traceable, with the domestic dairy enterprises in recent years, the performance of milk powder enterprises is under pressure, but foreign brands still control the goods and stabilize prices, the channel is confident, and the distributors have a strong willingness to promote brands and products. With the recovery of consumer confidence, there will be more and more brands that are optimistic about the Chinese market.
Foreign investment picks up
On the evening of February 20, FrieslandCampina released its first financial report after the new coach Jan Derck van Karnebeek took office, achieving revenue of 13.1 billion euros and operating profit of 75 million euros during the reporting period. Among them, FrieslandCampina's professional nutrition business group will increase its revenue by 89% to 115.5 billion euros, with an operating profit increase of 3.5 billion5% to 20.7 billion euros;
The highlight of the financial report is the professional nutrition business group, which pointed out that "the performance of the Meiso brand in the Chinese market is particularly strong. According to AC Nielsen data, the market share of Metso in the infant formula category has climbed to fourth."
FrieslandCampina is FrieslandCampina's nutrition business and FrieslandCampina's main business in the Chinese market. FrieslandCampina said that despite the pressure on China's infant nutrition market in 2023, the growth of Royal Beauty's brand products in the ultra-high-end market has led to an increase in revenue and profit for the entire specialty nutrition business group.
On February 19, A2 Milk Company released a financial report that also brightly showed that the market share of A2 Chinese label infant products in China in the first half of the fiscal year 2023-2024 increased from 49% rises to 64%, A2 milk powder entered the top five in China's infant formula milk powder market.
The financial report also showed that in China and other Asian regions, the British standard infant formula grew by 199% to 2NZ$10.5 billion. In the first half of the fiscal year, A2 Dairy Limited's EBITDA margin in China and the rest of Asia was 1., benefiting from strong sales of infant formulaNZ$35.9 billion, an increase of 219%。
Founded in 1871, FrieslandCampina is the only dairy company in the Netherlands to receive the royal title, owning nearly 80% of the pastures in the Netherlands, and its main products include dairy beverages, infant nutrition, cheese, etc.; Founded in 2000, A2 Milk Company is a New Zealand-based dairy company that focuses exclusively on A2-type protein dairy products in New Zealand, Australia, the United States and China.
Two Heavens
Due to factors such as the decline in the number of newborns and the transition of infant formula products to the new national standard, the scale of China's infant formula milk powder market has shrunk in recent years. In this context, some foreign dairy companies such as Abbott, Fonterra and Reckitt Benckiser have chosen to withdraw, while FrieslandCampina and A2 Milk continue to bet on the Chinese market.
A2 milk entered the top five camps of the overall domestic brand for the first time, and its market share increased to 64%, which is a manifestation of continuous focus and investment in the Chinese market. In August 2021, A2 Dairy Company announced the official acquisition of Mataola Dairy, a subsidiary of China Animal Husbandry Group, to further increase its stake in the Chinese market. A2 Milk Company has said that by cooperating with "national teams" such as Nongken and China Animal Husbandry, it can fully integrate into the local Chinese market and provide more and better products for Chinese consumers.
FrieslandCampina launched its "Expedition 2030" business strengthening strategy in 2023 with the aim of improving profitability and driving sustainable future growth, for which significant cost-saving actions will be initiated. The implementation of this strategy is FrieslandCampina's new CEO Van Yande, who has spent most of his time in the beer company Heineken Group, served as the chief commercial officer of Heineken, and has worked in the Netherlands, Hong Kong, Slovakia, Austria and other countries and regions, and has deep roots in the Chinese market.
In August, Fan Yande set the first stop of his first trip abroad after taking office in China, releasing his confidence in China's long-term development. In an interview with FrieslandCampina, Van Yande said, "Coming to FrieslandCampina was an easy decision for me and a great opportunity. I decided to come to China on my first business trip since I took office, and I think the Chinese market is very important for the company."
In January 2024, FrieslandCampina opened a new production and distribution center in Indonesia to produce sweetened condensed milk for the rest of the country's Southeast Asian countries. A new production facility is also under construction in Malaysia and is expected to be operational within the year, with a larger capacity and a wider range of products for export to neighbouring countries. However, due to uncertain market conditions, FrieslandCampina did not provide 2024 results**.
Compared with FrieslandCampina and A2 Milk Company, giants such as Abbott, Fonterra, and Reckitt Benckiser have chosen to retreat. In December 2022, Abbott China issued a statement saying that it would gradually stop the operation and sales of infant nutrition products in the Chinese mainland market; In June 2021, FMCG giant Reckitt Benckiser sold its infant formula and child nutrition business in China (including Chinese mainland, Taiwan and Hong Kong) to Primavera Capital for US$2.2 billion. New Zealand dairy giant Fonterra has sold three of its farms in China since 2019 and has also withdrawn its investment in Beingmate.
Whether it can be sustained
A change of commander is like a change of knife, and under the leadership of the new leader, FrieslandCampina has achieved initial recognition from the market. Zhu Danpeng, an analyst of China's food industry, believes that FrieslandCampina's overall performance is unexpected, mainly due to several aspects, one is the adjustment of the entire organizational structure and personnel; the second is the sinking of market strategy; The third is the improvement and innovation of the product matrix.
It is worth noting that FrieslandCampina also once wanted to be a beauty and took action. At the end of 2021, FrieslandCampina announced that it was considering a plan for its baby nutrition business, which attracted dairy companies including Mengniu, Yili, Junlebao, and New Hope to compete for bids, but in the end, FrieslandCampina suspended its bid for Meso due to reasons such as not meeting expectations.
After deciding to stay with FrieslandCampina, FrieslandCampina adjusted its organizational structure, first announcing that the two ** powder product series sold in the Chinese market have all passed the registration of the new national standard for milk powder, which means that it has obtained the entry ticket for milk powder competition in China; Secondly, according to different consumer groups, products, brands and markets, the business is divided into seven groups, among which milk powder is classified into the professional nutrition business group, mainly in China, Vietnam, Malaysia, Greece and Mexico and other five major markets, to do a good job in the Meiso brand.
Song Liang, an independent dairy analyst, said that the market share of foreign-funded dairy enterprises is gradually growing, mainly because of the domestic dairy enterprises in the past four or five years.
However, as a dairy company focusing on A2 type proteins, A2 Milk has already felt the pressure. After market cultivation in recent years, Yili, Feihe, Junlebao, Sanyuan and other domestic milk powder head camp dairy companies have launched infant formula milk powder containing A2 protein, and there is a momentum of latecomers in terms of sales and volume.
Before last year, the high-end market share of Meiso was also eroded by domestic brands, and the revenue of related businesses was under pressure. According to the performance report of Mercelain, from 2019 to 2021, the revenue of FrieslandCampina's nutrition business segment, including Meso, was 120.5 billion euros, 111.9 billion euros and 108.6 billion euros, showing a year-on-year decline.
According to the relevant report released by the China Business Industry Research Institute, in the third-tier and below sinking markets, the market share of domestic milk powder brands accounts for more than 60%, and the sales of offline mother and child stores account for as much as 75% in low-level cities and towns.
Under the "involution" of the industry, A2 Milk Company began to lay out dairy products and nutritional products for children and the elderly. Song Liang said, "* milk powder in the past two years still maintain growth, but at present, the first milk powder can only be said to be a copy of basic nutrition, with the successive intervention of enterprises, and increase scientific and technological innovation, the future will move towards the development of professional nutrition."
Regarding how the business in the Chinese market will continue to develop and what the next plan is, a reporter from Beijing Business Daily sent an interview letter to FrieslandCampina and A2 Milk Company by email, but did not receive a reply as of press time.
Beijing Business Daily reporter |Kong Wenxie.
FrieslandCampina's official website.
Edit|Aspen.