The SAIC issued the penalty notice this month following an investigation in 2013 across 20 provinces and municipalities.
Adjusted business practices
It found six affiliates of Tetra Pak were abusing their market dominance, by bundling its packaging facilities and services with materials, in China from 2009 to 2013.
Chris Huntley, senior VP, communications, Tetra Pak, said China introduced its competition legislation in 2008 and it adjusted its business practices to ensure compliance.
“Up to now, we were convinced that effort has been successful. Unfortunately, the SAIC investigation has concluded that not to be the case in relation to a few defined areas of activity,” he said.
“We are disappointed with the decision but have decided to accept it and do not intend to appeal. Where not already in place, we will now take the necessary actions and move forward with our business in China.”
Tetra Pak and its sister company, DeLaval, part of Tetra Laval Group, have been working on dairy farming projects in China since 2003.
Its first collaboration helped to upgrade farms that provided raw milk to China’s School Feeding Program; by 2014, all 194 farms involved in the project had reached EU quality standards and it provided virtual training to farmers through TV programs and the free distribution of educational DVDs and booklets.
Dairy Association of China
It also signed a five-year agreement with the Dairy Association of China last year to provide training to Chinese dairy farm managers.
The "Sino-Swedish Modern Dairy Farm Senior Management and Technical Talents Training Cooperation Agreement" will train 150 managers over the next five years, to run large-scale dairy farms including breeding, nutrition and disease prevention at the China Agricultural University and a two-month internship at a farm in China.
According to Dennis Jönsson, CEO, Tetra Pak, the Chinese government has been driving a transition from household farming activities, involving a handful of cows, to medium or large-sized farms, which have more than 100 milk-producing cows to improve farming efficiency, increase product quality and enhance standards of animal welfare, since 2008.
FACTBOX: Tetra Pak Greater Cluster China
Established in: 1979 (Tetra Pak China Ltd. Registered in Hong Kong)
Turnover 2015: €1.75bn ($1.85bn)
Number of employees: 2,164 (by end of 2015)
Installed machines: 2,239 (by end of 2015)
Packages sold 2015: 43.6bn packs
Number of factories: 5 (Tetra Pak converting factories in Hohhot, Beijing, Kunshan, Foshan and Taiwan)
Top five customers: Yili, Mengniu, Wantwant, Bright, Vitasoy
By 2020, the government hopes to raise the proportion of dairy cows reared on such farms to 60%, compared to 45% today. However, a shortage of qualified managers capable of running operations of this scale prevents them from achieving this.
“For more than 30 years we have been working with the Chinese government to grow the dairy industry sustainably. China is in an exciting new phase of development in dairy farming and as an industry leader, we have a key role to play in improving performance,” added Jönsson.
Thanks to the popularity of ambient drinking yogurt in China, Tetra Prisma Aseptic has become its top selling package in the country.
Ambient drinking yogurt has taken China by storm since its launch in 2010. It accounts for 13% of the country’s total yogurt category in 2014 and is expected to achieve sales of almost €5bn ($5.3bn) by the end of 2017.
Huntley said its success is driven by consumer demand for convenience, taste and nutritional benefit and consumers worldwide are choosing snacks that fit into their busy lifestyles.
The Tetra Prisma Aseptic ambient drinking yogurt can be consumed on the go and does not need to be refrigerated.
Other companies have recognized the potential of the new category among Chinese consumers. Since the launch of Mosili’an, which Tetra Pak developed with its customer Bright Dairy in 2010, 13 dairy producers have entered the Chinese sector with Tetra Pak processing lines.