"This market has not been so successful for us as others in the Asia Pacific region," Robert van Dongen told AP-FoodTechnology.com. "The China market has proved particularly challenging because of intense competition, very tough pricing policies and a growing over-supply of production. Having carefully considered the options this is by far the best route to take."
Friesland Coberco has had a majority interest in the Chinese dairy company Friesland Tianjin Diary Foods since 1996. Under the agreement the company will be transferred over to its joint venture partner on 24 November.
The terms of the agreement are that Friesland Coberco will maintain a 5 per cent share in the company while Tianjin Sino-Finnish will hold on to the remaining share. This means that the Friesland's global brand, Dutch Lady, will remain under its control in China under a licensing agreement with Tianjin.
Currently the China manufacturing operations produce milk-based and yoghurt drinks that are largely distributed in the three main economic regions of Guangzhou, Beijing and Shanghai.
Friesland said it would remain active on the China market through its sales office in Hong Kong, which will continue to supply the main regions it is already represented in. The company added that it would continue to distribute and market Frisco infant foods, Dutch Lady milk powders and Dutch Lady Calcimex - activities that were previously carried out under the joint venture.
In 2003 Friesland had a net turnover of €4.5 billion, of which €691 million was attributable to the group's Asia Pacific operations, down from €720 million in 2002. This result was an early indication of the troubles that Friesland was experiencing in the China market, reflecting its falling market share there.
"In the long-term we shall continue to maintain our presence in the China market through this brand, but for the medium term our focus will continue with our operations elsewhere in the Asia Pacific region," said van Dongen. "Although we have no plans to extend our manufacturing operations in Vietnam, Thailand, Indonesia and Malaysia, we intend to concentrate on extending our market reach in these markets."