Tetra Pak yesterday unveiled a new 60-million-euro converting plant in Hohhot, the capital city of the Inner Mongolian capital autonomous region, the home base of China's leading dairy producers, Mengniu and Yili, and the company's key clients.

Dennis Jonsson, president and CEO of the Tetra Pak Group, said during the opening ceremony that China was one of the fastest growing markets for Tetra Pak and would continue to be a strategic market for the liquid food package solutions provider in future as well.

"Others are saying 'decline', you (China) are saying 'growth'," Jonsson said.

The plant will meet the increasing demand for aseptic carton packaging material in China, and also cater to the country's dairy and juice industries.

The Hohhot plant will mainly manufacture Tetra Brik Aseptic (TBA) and Tetra Fino Aseptic (TFA) cartons with a designed capacity of 11 billion packs per year. It is also expected to help enhance delivery efficiency to Tetra Pak's two key clients, Yili and Mengniu. Its other clients include big brands such as Sanyuan, Huiyuan and Wanglaoji.

The Swedish firm now has four aseptic carton packaging manufacturing bases -- in Foshan, Kunshan, Beijing and Hohhot. These can cumulatively produce around 50 billion packs annually.

Jonsson told China Daily that the company has invested over 2.7 billion yuan in China so far. "We are growing with China," he said.

The Chinese market accounted for nearly 10 percent of Tetra Pak's global business in terms of revenue in 2008, while the figure was almost 20 percent by number of packs produced. The company has operations in more than 160 nations and regions, and its market share in China's aseptic carton packaging sector is 75 percent currently.

Jonsson admitted that last year's melamine scandal, involving its clients Sanlu and Mengniu, had affected Tetra Pak's business in China.

The company had expected a 16-percent year-on-year growth in local business last year, but it achieved just 8 percent growth, mainly due to the food safety scandal.

But the surge in its Chinese revenue was still higher than the company's global business, which increased only by 5 percent year on year in 2008.

"We find China's dairy industry is recovering faster than our expectations," Jonsson said.

On Monday, China National Oils, Foodstuffs and Cereals Corp (COFCO), the largest food importer and exporter, and Hopu, a private equity fund, said they would spend HK$6.12 billion to buy a 20 percent stake from Mengniu and its existing shareholders. The deal would make these investors the biggest stakeholders in China's largest liquid milk producer.

Jonsson said he did not want to comment on his clients' businesses. But he said he had met Niu Gensheng, founder and chairman of Mengniu and talked to him about the transaction. Niu said the deal was positive to Mengniu's business.

"It's positive to our client, so it is positive to us," he said, adding that the dairy market's recovery and further growth would provide more room for growth for the company.

China's dairy industry witnessed a 20-percent growth rate over the past decade, according to Dairy Association of China. Every Chinese on average consumes 30 kg of dairy products annually, much less than the world average of 120 kg and 300 kg for developed nations, which indicates huge growth potential for the dairy industry here.

(China Daily July 9, 2009)