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.
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.
However, 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.
Show the press release
Biostime and Arla Foods sign a 10-year financing and supply agreement
Arla Foods - Jun 22, 2012 09:30 CEST
Biostime International Holdings Limited, a premium provider of high-end pediatric nutritional and baby care products in China has signed a 10-year Financing and Supply Agreement with Arla Foods.
This agreement is aiming at securing Biostime sufficient production capacity at Arinco, Arla's largest infant formula production facility based in Denmark equipped with full formula spray-dry technology and using Arla’s own Danish milk.
Both companies have entered into a commercial agreement, qualifying Arla as the third European supplier of Biostime in the field of infant formulas. In order to strengthen their cooperation and secure additional capacity at Arinco, both parties have signed a 10-year agreement aiming at co-financing an investment of a possible upgrade and extension of Arinco’s capacity and secure a yearly capacity of 20,000 tons of infant formula powders dedicated to Biostime by 2015.
Jens Jorgen Hjortshoj, Vice President of B-to-B Nutrition Business Unit in Arla Foods:
"We are very pleased to sign this 10-years cooperation agreement with Biostime. This new cooperation will have a positive contribution into Arla's business by enabling our company to produce high-quality dairy products with superior added value. 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."
Original source: Arla Foods
