The Irish Dairy Board has signed an agreement with a leading Chinese dairy company to collaborate on logistics, product development and manufacturing to increase its market presence in China.

The IDB has signed a memorandum of understanding (MOU) with Chinese dairy company, Guangxi Royal Dairy. This agreement is an important step in opening up routes to market for Irish diary products in the key Chinese economy.

This will see the IDB and the Chinese company agree to co-operate in the development and sale of new products for the Chinese dairy market. It will see Irish milk being used as ingredients for new products in China where both companies will collaborate in the area of branding, logistics and distribution.

IDB managing director of consumer foods international, John McKenna said, “partnerships such as this are key to building business in China”.

Guangxi Royal Dairy Co., Ltd is a manufacturer of dairy products and is listed on the Chinese stock exchange. Based mainly in the Guangxi region in southern China and established in 2001, it owns 24 grassland farms, four processing plants and two technical centers for product R+D. Last year it had revenues of €160m with an growth rate of 20% per annum.

The company is principally engaged in the production, processing and distribution of liquid milk and the related products, as well as other drinks and foods. It sells pasteurized milk, yogurt, fruit milk and also specializes in buffalo milk.

Iwan Brandsma, international business development director with the IDB, said “this is about ‘Chinalising’ the Kerrygold portfolio. This agreement will help do this”.

This agreement will see new Kerrygold products be developed by the partner through their insights and local market knowledge and will help bring Kerrygold products to the mass market in China.

It may eventually lead to recombining Irish milk powders in China into liquid dairy products such as dairy beverages or flavoured liquid milk products.

The Chinese dairy based beverages market is worth $15bn, while the liquid milk market is worth $18bn.

The IDB engaged C.W. Downer & Co. to seek a suitable partner in China. Philip Smith, MD at the investment bank, which has offices in Dublin and Shanghai, said “this is the result of almost a year's work”. He added this company was selected for a number of reasons. Firstly it is large and competent and has state of the art facilities.

Even though Guangxi Royal Dairies is not in the top three dairy companies in China, it is at the top of the second tier. As Ireland is a smaller player in global terms, working with ‘smaller’ dairy companies such as this is key to success in huge markets such as China.

He says that partnering is important in this market, as it is very different than traditional markets for Irish product.