Analysis Dairy

FrieslandCampina is now at full strength in Asia

July 4, 2024 - Wouter Baan

In a period of barely a month, FrieslandCampina has completed the construction of two large dairy factories in Southeast Asia. No costs or effort have been spared. Both in Malaysia and Indonesia, the cooperative dairy company believes that with Western-looking production locations, they can quickly tap into interesting growth markets. However, the foreign ventures of FrieslandCampina can sometimes be sensitive to the Dutch members of the cooperative, but the criticism is completely unjustified, as assured by the dairy company.

The top management of FrieslandCampina is currently in Indonesia, where the new factory on the outskirts of the city of Cikarang was opened on Tuesday. Since 1922, FrieslandCampina has been active in this country through its subsidiary Frisian Flag and they are far from done. It is proudly reported that a record investment of €256 million was made for the new factory. CEO Jan Derck van Karnebeek and his colleagues immersed themselves in local outfits for the festive occasion, resulting in nice images. A similar scene took place in Malaysia at the end of May, where the subsidiary Dutch Lady also celebrated a factory opening. This means that two major long-term projects in the same region have been completed almost simultaneously.

Challenges in Nigeria
The question is whether the dairy farmer members are happy with the investments made in Asia. They sometimes tend to think that the foreign adventures mainly cost money instead of contributing to additional milk money, which is ultimately what it is intended for. Given the challenges FrieslandCampina faces in Nigeria and (to a lesser extent) Pakistan, there is some merit to that thought. Additionally, members have not forgotten the completely failed venture with the then partner Huishan Dairy in China a few years ago.

Unfounded skepticism
A spokesperson for FrieslandCampina emphasizes that such skepticism is absolutely unnecessary for the investments made in Malaysia and Indonesia. Without going into detail, it is reported that these activities positively contribute to the dairy company's results. Looking ahead, FrieslandCampina also sees a lot of growth potential in densely populated Southeast Asia. In Indonesia, there are 275 million people and the average dairy consumption is currently about 16 liters per capita. This could easily grow to 20 liters in the coming years, according to FrieslandCampina. The new factories are also seen as a hub to other Asian markets.

The factory in Indonesia can be expanded to produce 1 billion kilograms of dairy products, of which 70% is already filled at the moment. Naturally, not a drop of Dutch milk is used for this. The supply comes from local dairy farmers who are often cooperatively organized in a fragmented manner. Through education and training, the Dutch dairy giant believes it can significantly increase milk production in the coming years, considering that the daily production often only reaches 7 liters per cow.

Half-year figures
The success of activities in Asia can be monitored more effectively in the coming years than before. FrieslandCampina will report the results per business unit separately. At the end of this month, FrieslandCampina will release the half-year figures, and this new way of presenting will be shown for the first time. It will cover not only the past half-year but also retrospectively for 2023. Both Malaysia and Indonesia fall under the Asia business group. Whether the skepticism of dairy farmer members is justified can be seen quite soon.

Wouter Baan

Wouter Baan is the editor-in-chief of Farmerbusiness and a market specialist in dairy, pork, and meat at DCA Market Intelligence. He also tracks developments within the agribusiness sector and conducts interviews with CEOs and policymakers.

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