Coca-Cola, Mengniu's JV to sell chilled milk

US beverage giant Coca-Cola Co said on Tuesday that it has set up a joint venture with Chinese dairy giant China Mengniu Dairy Co to produce and sell chilled milk in China.

Coca-Cola said the joint venture is a reaffirmation of its long-term commitment to the Chinese market and will look to tap Chinese consumers' growing interest for value-added and better-tasting dairy products.

In addition, the joint venture will look to make full use of the advantages of both companies, including dairy development and processing techniques, brand influence and distribution channels.

"Creating a new chilled milk brand for Chinese consumers will enable them to upgrade their dairy consumption," said the statement, without elaborating on the details of the new product or the brand, nor the size of the investment.

The partnership will support Coca-Cola China's evolution into a total beverage company, providing an enriched portfolio of consumer-centric beverage offerings and demonstrating its long-term commitment to the China market, said a Coca-Cola statement.

In January this year, Coca-Cola added Chicago-based Fairlife－an innovative and value-added dairy brand－to its portfolio. Fairlife CEO Tim Doelman had said that the increased investment would allow the companies to further innovate and branch out into other dairy segments.

Industry experts said that chilled milk sector is an area where beverage and dairy producers have competed fiercely for market share.

At the moment, Mengniu and Yili dominate the UHT(ultra high temperature) milk segment in China, which also accounted for 88 percent of the family milk purchases in the country last year, according to Jason Yu, general manager of market research consultancy Kantar Worldpanel China. "Chilled milk was purchased by just 29 percent of the Chinese families and hence has huge growth potential."

The COVID-19 pandemic has further enhanced consumers' appreciation of dairy products, particularly high-quality protein and other added-value functions, said Yu. The rapid growth of new retail channels such as Hema and emerging fresh food apps will further help the development of chilled milk, he said.

Mengniu's regional farming resources and distribution channels are expected to benefit from the new joint venture. By the end of last year, Mengniu's fresh milk products, also its youngest business segment－Shiny Meadow and Modern Meadow－had covered 24 provincial level regions and 50 major cities in the country. Sales of its chilled yogurt maintained single-digit growth and took the top position in the industry.