【Milk,Mess,with,Price,War】 Mess up with

　　Pushing open a slightly rusted iron gate and walking up along a twisted wooden staircase, people will see a Japanese-style entrance, which is flanked by two metal shoeboxes. It is hard to associate the two-storey building in Suzhou with the Asian largest dairy company. But actually, a plate that hangs beside the entrance has the Chinese and English words meaning Meiji Dairies Suzhou Co., Ltd. This place is the provisional office for Meiji Dairies Corporation in Suzhou.
　　People working for Meiji Dairies consider the location of its plant in Suzhou as a secret. Actually, the plant is under construction now. But nothing except a small metal plate with “Japanese Meiji Dairies take 8.7 acres of land here”could reveal its identity. From the start of next year, yoghurt and pasteurized milk with the logo of Meiji will be transported from here to different supermarkets for sale in Suzhou and Shanghai.
　　Moving the plant from foreign countries to China and providing local consumers with fresh dairy products as a trustworthy brand, this is the plan of Meiji Dairies. And Meiji Dairies is not the only foreign company that gets into Chinese dairy market in a low profile. At the end of this July, Don Mulligan, CFO of America-based General Mills, which owns Haagen Dazs ice cream and Wanchai Ferry frozen food, said to Financial Times that China was the first emerging market for its yoghurt products. In addition, New Zealand-based Fonterra Cooperative Group, which is good at running meadows, has the plan of producing liquid milk products.
　　When the dairy industry in Europe and America had stagnant development, China nearly contributed half of the new market space for the global dairy industry. In the past ten years, the yoghurt industry in China had over 20% growth rate annually. A group of data could serve as the example: in 2009, the average price of raw milk dropped to 1.8 yuan per kilometer in the world, but in China the price was about 3.1 yuan.“China is a very attractive market,” said Hirotada Nakamura, executive director of Meiji Diaries.
　　The quality problems of Chinese milk companies also contribute to the formation of the best opportunity for foreign companies to take the Chinese market. “From the second half of last year, about five or six foreign companies came to me for the market information,”said Wang Dingmian, a senior researcher of Chinese dairy industry. “I believe that more foreign companies will come in the next two or three years.”
　　Those established and experienced foreign dairy companies began their new march in China. Will they be greeted with harvest, or failures they had encountered before? 　　 Small Assault
　　The main project of Meiji Dairies’ plant in China is the Industrial Park in the Sci-Tech City close to the Taihu Avenue, Suzhou. On the afternoon of a hot day, three to five groups of workers are installing original devices from Japan. It is the first time for these devices came to China. In the following months they will go through operational commissioning while the factory manager recruits around 100 people from Suzhou.
　　The century-old Meiji Dairies has a good reputation and its milk powder for kids and infants are popular among Chinese young mothers, who would like to buy its products directly from Japan. However, it is the first time that Meiji Dairies sets up plants in China and uses local raw milk to produce the lowtemperature liquid milk products.
　　Meiji Dairies could borrow quite a few experiences from its peers. The frontrunner of Japanese milk companies that dabbled at business in China was Morigana & Co., Ltd, which established a plant in Harbin, Heilongjiang in 1994 to produce milk powder. It did not have a follower until April 2008 when Asahi Beer united with Itochu Corporation to found Shandong Asahi Green Source Dairy Co,, Ltd. It built and ran its own meadows and produced low-temperature liquid milk. However, these two Japanese enterprises did not achieve certain fames and influences in the Chinese market like they did in Japan and other markets.
　　“Expanding the overseas business is one of the major strategies Meiji Dairies fixed in recent years. We feel that China boasts great development potential in the future. That’s why we are here,” said Katsuhisa Mizoguchi, managing director of Meiji Suzhou Co., Ltd with a courtesy smile even though he is sitting in a small and poorly decorated meeting room. He joined in Meiji Dairies after graduation and spent almost all his 35 years in the plant in Japan. His career met a great change this June. Now he is the commander of Meiji Dairies’ force of overseas expansion though his mild and gentle attitude seems to be a sharp con- trast against his current role.
　　The imported original devices include the testing instruments that Meiji Dairies spent years improving. The system can detect any improper contents that should not be added into milk from the injection of raw milk to the finalization of products to be sold and automatically send alerts. “China has its own rules to restrain this market, based on which we implement our own methods of supervision,” said Katsuhisa Mizoguchi. What Meiji Dairies brought to China also consist of its years’ experiences and important technologies, such as the ESL fresh-maintaining technology and the tiny adjustment to the cold chain temperature. These technologies will have great influence over the taste of products. 　　Because of the special require- ments of devices, Meiji Dairies chose the expensive way – buying land and building a factory by itself. When the Chinese dairy companies were disgraced by incessant scandals, foreign companies generally hold conservative attitudes towards the cooperation with Chinese local companies. “Everyone has their own advantages but it is hard to converge our operating concepts,” said Katsuhisa Mizoguchi. As a new arrival in China, he just learnt how to say “thank you”. For him, the biggest difficulty is how to integrate Meiji Dairies into China without changing its original features in Japan.
　　Katsuhisa Mizoguchi has brought the seriousness and cautiousness of Japanese into the factory of Suzhou. The provisional office building of Meiji Suzhou is very clean in spite of its muddy surrounding caused by the rain. Workers should change their shoes when walking into and out of the building. For Katsuhisa Mizoguchi himself, he rejected the advice of taking a glass of fresh milk in his hand when he was photographed. He stated that he could not do it because the factory in Suzhou has not yet produced milk.
　　But he had a softer attitude towards the taste of yoghurt. “The yoghurt Chinese people have is usually sweeter than the one in Japan,” he explained. He plans to adjust the taste of yoghurt regularly according to the feedback of the market or maybe Meiji Dairies will launch two different types of products. “We hope to make Chinese consumers have original Japanese yoghurt and maybe they could like it.”
　　Meiji Dairies has already owned liquid milk business in other overseas mar- kets. For example, it started to produce and sell milk products 20 years ago in Thailand. But China owns a much larger market and thus is one of major overseas markets of Meiji Dairies. Katsuhisa Mizoguchi expects the factory in Suzhou to have the output valuing 150 million yuan in the first year. The output will be gradually increased to 600 million yuan by the fifth year. “Presently we have no plan to expand our arms to other cities than East China.”
　　The dairy market in East China has strong players like local company Shanghai Bright Dairy and Taiwan-based Weiquan Dairies. Both have popular and famous low-temperature milk products, like yoghurt, pasteurized milk and lactic acid drinks, same as Meiji Dairies’ product portfolio in China. “We position our products as being affordable for ordinary Chinese consumers. Their living level is improving at a fast pace. I think most of local consumers in Suzhou and Shanghai can afford our products,” said Katsuhisa Mizoguchi though he refused to tell the detailed price of his products. 　　 Big Control
　　As a newcomer, Meiji Dairies can make their presence in China secretly. For it and other foreign dairy companies, to find safe and high-quality milk source is the key to their success in China.
　　Problems are most likely to happen to milk source in China. Compared with the big meadows in Americas and the natural grassland in New Zealand, the areas of producing milk in China are scattered and small and equipped with less developed feeding and breading technologies. There is no intermediate manager to supervise the quality of raw milk like the “rural cooperatives”in Japan either. Simply speaking, the development of milk source cannot catch up with the following dairy product processing industry. This mismatch and the lack of supervision result in the war of contending milk source in China in 2008. Driven by profits, milk cow raisers added melamine into the milk, leading to the scandal of “poisonous milk powder”.
　　Nestlé is among first foreign dairy companies that got into China. Many of its peers quitted China. Nestlé was settled in China because it invested in the milk source from the very start. The Swiss company signed contracts with peasants and provided them with trainings, technological supports and small loans to improve the quality of raw milk.
　　Nestlé’s factory in Shuangcheng County, Harbin City, Heilongjiang Province was put into production in 1990. Nestlé chose this area because it is one of the most suitable places for feeding milk cows. However, at that time, this place had a comparatively weaker basis for breeding milk cows. “I remember that we only acquired 2 tons of raw milk on the first day of our operation in 1990, which could not fill our evaporator at that time,” said Lu Ming, head of Nestlé’s factory in Shuangcheng. Now, more than 1000 tons of milk is sent to this factory every day and Shuangcheng has become the county with the largest amount of milk cows in China. The milk output per capita also increased. As the number of peasants signing contracts with Nestlé in Shuangcheng decreased from the maximal 30 thousand to 10 thousand, 66 of them own big meadows where the daily output of raw milk exceeds 1 ton.
　　This June, Nestlé built a cow breeding technology and training center and three supporting sample meadows in Shuangcheng. These meadows are similar to the teaching and experimenting rooms for making peasants know how to operate and manage large meadows. This is a new attempt of Nestlé in China to have a better control of milk source.“In recent two or three years, we give priority to the question of how to converge the small cow breeders in order to lower the difficulty in management,” Lu Ming said. 　　Even though the milk cow breeding in China was greatly modernized in the past dozens of years, there are still 70% of milk cow breeders in this country to be left below the standard size. Presently, the output of local milk in China is around 30 billion liters every year. The amount of milk consumed by Chinese consumer will increase to 70 billion liters in 2020. “There is still a big shortage. So Fonterra and other companies are all marching into this field,” said Li Zhaolin, deputy managing director of Inner Mongolia Dairy United Sci-tech Co., Ltd.
　　Fonterra is building its first meadow complex in Yutian County, Tangshan City, Hebei Province. When the planned five meadows are finished, more than 15000 milk cows will be fed there and the annual output of raw milk amounts to 150 million liters. “We hope we can produce 1 billion liters of milk with the quality matching New Zealand every year in China after 2018,” said Kelvin Wickham, who just took the president of Fonterra Greater China and India on August 1. He also said that Fonterra was looking for a proper site for its second meadow portfolio.
　　“In China, there are a lot of places suitable for meadows. According to my experiences, whether we can have an easy access to feedstuffs and water is the most important factor for the site of the meadow,” aid Peter Moore, vice president of Fonterra’s International Meadow Business. Actually, Fonterra chose Hebei as the site for its first meadow complex in China just because there are a lot of easy-to-get water sources and silage forages. In addition, the county is very close to Beijing and other big cities, which is convenient for the transportation of milk.
　　In comparison, the climatic and geological conditions in South China are not good for raising milk cows. “Milk cows are afraid of heat and rarely produce milk if the weather is too hot. but South China has a great need of milk,”Lu Ming said. Therefore, Shandong and Hebei are better places for foreign companies’ meadows than Heilongjiang and Inner Mongolia because they are closer to South China.
　　Restrained by the natural conditions, it is vital to improve the per unit output of milk cows. “In China, this figure is much smaller than in foreign countries,”said Dong Yuguo, standing vice president of Nestlé Greater China. Nestlébelieves that it has no advantages in self-built meadow so it did not take the pattern. The newly invested exemplary meadows are based on the cooperation with other foreign companies that specialize in the meadow design, breeding and training. 　　Different from Nestlé which started with details like training, Fonterra believes that investment strategies lead to boom or doom. It focuses on the operation of meadows and thus is more experienced than Nestlé in that field. “We insist on keeping the operating rights of all our meadows in China through the stake-based cooperation to make sure the raw milk can meet the quality safety standard of Fonterra in the world,” said Peter Moore. In his opinion, a perfect combination of forage management, epidemic prevention, breading genetics and environment control could lead to higher per unit output and minimize the potential risk.
　　 Another Failure?
　　The recent efforts of foreign dairy companies in China mean that a battle is coming.
　　Like other brands, Meiji Dairies mainly sells its products through shopping malls, supermarkets and convenient stores. These places have a complete set of cold chain devices. But Katsuhisa Mizoguchi believes that Meiji Dairies’products have unique advantages in taste and safety.
　　The market situation in Beijing, Shanghai and other developed cities in China shows that the low-temperature dairy products have become the main- stream for consumers and this is just the fort Meiji Dairies and other foreign companies want to take. One of the major low-temperature dairy products is yoghurt. “Yoghurt is appealing with its taste and nutrition. No antibiotics are allowed to be used in the process of producing yoghurt. Thus yoghurt has higher requirements for raw milk and it is safer, promoting the development of this market,” said senior researcher Wang Dingmian. In his opinion, that’s why most foreign dairy companies are making efforts in yoghurt, if the primary reason is not the higher profit margin of yoghurt products.
　　“Major consumers of yoghurt are centralized in the first- and secondtier cities of China, where people have strong consumption power. For dairy companies, it is easier fro them to earn profits and build a well-run supply chain,” said an insider from Chinese local dairy company Yili.
　　In addition, the low-temperature milk products are better choices from nutrition or energy saving. In most countries, low-temperature milk products are dominant in the milk market. China is one of the few countries whose milk market is dominated by normaltemperature milk products (75%) as the latter is easier to be transported, stored and toted and free of the restriction of the time. Therefore they have earned certain space in China, especially in the secondary markets without complete cold chain devices. 　　“Cities in East China are our primary targets,” said Katsuhisa Mizoguchi. Consumers in these areas have higher recognition of Japanese brands and corresponding consumer power. For example, in Shanghai, there are liquid milk products of Meiji Dairies sold in some supermarkets, but the price is 2 times the local products.
　　The frequently exposed scandals destroyed Chinese consumers’ confidence in local dairy brands. And the high price and technological problems cut off the way of importing fresh milk from foreign countries. Generally speaking, Chinese young men born after 1980 have the habit of drinking fresh milk and now they are the major consumers of China.
　　The last round of foreign diary companies’ efforts in China ended up with their failure in this country as there were no such good conditions. In the 1990s, Danone, Parmalat, Kraft and Friesland successively set up plants in China, but they all left in the early and middle 2000s.
　　Why did these foreign giants end up with failure in China? “They overestimate the pace of cultivating and developing the dairy market in China,” Wang Dingmian said. “Foreign brands usually took the way of high-price products and could not survive the chaotic price war in China. They had no control over the milk source either. But above all, Chinese people did not like drinking milk at that time.”
　　Chinese local brands helped to form the habit of drinking milk of Chinese people. Then, foreign companies’massive withdrawal has influenced the evaluation of Wall Street on the Chinese dairy company. Morgan Stanley and its peers were once hesitant when it came to investing in Chinese diary market. Their biggest concern was that how many people consider milk as important as rice.
　　Mengniu Milk went public in Hong Kong in June 2004 undoubtedly reassured bankers in Wall Street, who gladly improved the stock price of Mengniu by two thirds in a few months.
　　In those years, Mengniu and Yili sent lots of freighters to carry the normal-temperature milk in Tetra Pack, which could extend the qualityguarantee period to months. This effectively put an end to the unbalanced dairy areas. The slogan “Invigorate Chinese with 500 gram of milk every day” made more and more Chinese parents connect milk to their children’s health. Thus the dairy products became another indispensable nutrient element for Chinese born after 1980. Then, the government launched the project of“Breakfast with Milk”, which helped domestic diary companies to penetrate into the most remote areas of China. 　　But then came out the Sanlu Event. The milk powder with melamine greatly impaired the development of the dairy industry of China. Some foreign companies became the victim to this event too– in 2006, Fonterra spent 107 million US dollars acquiring 43% of the stake of Sanlu and they built a meadow together in 2007, but both investments did not bring expected returns.
　　In order to eliminate the effect of the melamine event, the General Ad- ministration of Quality Supervision, Inspection and Quarantine of China, the Ministry of Industry and Information Technology and the National Development and Reform Commission issued two industrial management rules, requiring all dairy companies to get the production license before the end of March 2011. Those enterprises failing to get the pass the examination of products should not get involved in the production and distribution of dairy products. This new stimulation eliminated many small dairy companies.
　　Such a policy gave a signal to foreign dairy companies that the industry was not stable and investment at that time faces many uncertain factors and risks, even though they were given higher pricing rights and better cooperation conditions. “For example, do you dare to go to Iraq for travel during the war?”Wang Dingmian said. From 2008 to 2010, foreign companies were watching how the situation went and preparing for actions.
　　From 2011, foreign companies began to take actions. Many analysts thought that foreign dairy companies’entry must affect the competitive situation of Chinese dairy industry. But market players said that Mengniu, Yili and Bright Dairy would still take the dominant place in the Chinese dairy company. This will not be changed for a while, because they take control of the best meadow resources in China. In addition, the vast market in West China is still the world of normal-temperature milk products. An analyst said that the price war is still lingering on among Chinese dairy companies. And foreign companies are definitely reluctant to join in the war. But “without the war, you can not get access to big markets and consumers.”
　　In spite of that, foreign companies are still confident in their future in China. They believe that they can change the situation of dairy industry in China as long as they can get the key to achieving the success.

推荐访问:Mess Milk War price