Asia remains a growth region for FrieslandCampina

FrieslandCampina has experienced a number of setbacks in Asia in recent years, but it still wants to grow in that region. This is what Hans Laarakkers, Global Director Business Development at FrieslandCampina, says in an interview with M&A, an supplement of Het Financieele Dagblad.

According to Laarakkers, Asia is interesting because of its growth potential. Pakistan is the third largest dairy producer in the world, but dairy processing is still in its infancy. Given this, only 10% of production is processed and packaged. Most of the milk is sold directly on the market. FrieslandCampina expects consumption to shift to packaged dairy due to the growing middle class and urbanization.

FrieslandCampina acquired a majority stake of 2016% at the end of 51 Engro Foods† This is Pakistan's second largest dairy company. Laarakkers says that this decision was not taken lightly, as the country is located in a relatively unstable region. Only Libya and Yemen score lower in terms of security. According to Laarakkers, Engro Foods is a solid company, something that is not easy to find in that region. Together with the World Bank (20%) FrieslandCampina (80%) owns the shares of Engro Foods.

Challenges in Asia
In the meantime, various challenges have been reviewed, Laarakkers acknowledges. Shortly after the acquisition, local authorities and interest groups accused FrieslandCampina of extending the shelf life of milk by adding harmful chemicals. The dairy, in turn, is trying to have the government ban the sale of loose milk from a hygiene point of view. Laarakkers knows from experience that such acquisition processes are time-consuming. 

Also in China, acquisitions and mergers do not always happen automatically, given the problems with Huishan Dairy† Nevertheless, FrieslandCampina wants to continue to focus on the sale of processed dairy in emerging markets. This is because the margins on supermarket milk are nil. Laarakkers therefore indicates that FrieslandCampina wants to be a processor of special dairy products for children, athletes and the elderly.

Few candidates available
By the simplification FrieslandCampina expects of the organization to become more decisive in making acquisitions and mergers. Due to the unrest in Pakistan, the dairy company has not moved on the takeover path in recent months. In any case, relatively few takeovers take place between dairy processors. 

Nevertheless, the dairy cooperative does not rule out future acquisitions. According to Laarakkers, FrieslandCampina mainly looks at markets such as Asia, Africa and the Middle East. However, he emphasizes that potential takeover candidates are few and far between in these regions. 

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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