Tetra Pak, a global leader in packaging and processing solutions, is not only eyeing China as its largest market, but also as its fastest-growing regional innovation hub, while expanding its business categories including food supplements to drive new growth, said its top executive.

Globally, Tetra Pak generated net sales of 12.8 billion euros ($13.9 billion) last year, a 2-percent increase year-on-year. The Asia-Pacific region contributed 33 percent of total revenue.

Speaking on its strategic positioning in China, Paul Zhu, president of Tetra Pak Greater China, said the move aims to tackle challenges and seize opportunities in dynamic food and beverage sectors.

The Chinese fast-moving consumer goods market recovered in the first quarter, according to the China Shopper Report 2024, released by Bain & Company and Kantar Worldpanel China.

The domestic packaged food and beverage sector, the main customers for packaging solutions providers such as Tetra Pak, witnessed stable growth last year, rising 2.7 percent and 4.3 percent year-on-year, respectively.

However, the dairy sector in China faced periodic challenges, including a recent 2.9 percent drop in packaged milk sales in the first quarter compared to last year, according to the report, likely due to increased out-of-home activities and consumption.

Post-pandemic consumer needs and preferences have shifted significantly, so understanding consumer behavior and competitor moves is crucial for unlocking potential growth opportunities, said the report.

"Our customers in China strive to differentiate themselves through innovation," Zhu said. "How quickly and effectively we can drive innovation is critical for our customers to succeed in China's fast-paced consumer market."

For Tetra Pak, the focus is changing from "transferring" capabilities and solutions to China to "tailoring "them for China, in order to address stronger need for innovation and the speed of innovation, he added.

Local deployment of global-ready offerings is no longer good enough to fully meet market needs. Recent years have seen a pivot toward collaborative innovation and knowledge sharing, leveraging improved offerings enabled by advanced tools and technologies, said Zhu.

Therefore, the company has upgraded its Product Development Center and established the Development & Technology Center in Kunshan, Jiangsu province, to house workshops, labs and facilities with more than 60 research and development staff.

The centers provide a one-stop co-creation service, aligning customers, distributors and market teams to innovate collaboratively, from on-site flavor creation to product testing, significantly shortening innovation cycles and boosting market success rates, said Zhu.

For example, as more food and beverage producers target lower-tier and rural markets, Tetra Pak tailors its packaging solutions to fit these markets by offering suitable sizes, designs, pricing and distribution methods.

While packaging constitutes the majority of its business revenue, the processing business covering various categories beyond dairy such as cheese and ice cream production is poised for expansion, it said.

Moreover, the company's technical services in China, traditionally focused on equipment maintenance and spare parts, have rapidly expanded, driving considerable revenue growth.

For example, Tetra Pak developed more service solutions to help small and medium-sized producers quickly switch packaging sizes and volumes by remodeling existing production parts, offering a versatile and cost-effective production line upgrade to better meet consumers' ever-changing requirements.

Tetra Pak has offered solutions for leading dairy companies like Yili Dairy and Mengniu Dairy in their digital transformation, with their E3/Speed Hyper filling machines featuring e-beam sterilization technology. The new technology has set a new global benchmark for packaging speed, notably reducing operating costs and enhancing environmental sustainability, according to the company.

Creative strategies are what drive dairy brands in China to better navigate some of the industry's emerging challenges, such as a declining birthrate, an aging population, a market traditionally dominated by shelf-stable milk products and increased consumer preference for more cold-chain products, said Yan Wei, a principal of the China health and consumer and investor support teams at global management consultancy Roland Berger.

Despite the challenges in the domestic dairy industry, Tetra Pak said it remains confident in the Chinese market.

"The dairy market in China has its own dynamics and the long-term potential remains promising and vast," Zhu said.

"China presents numerous opportunities, with segmentation and the pursuit of health and 'green' emerging as key market trends shaped by changing consumption habits," Zhu added.

Meanwhile, Tetra Pak has invested in new categories to fuel growth, including food service, dietary supplements and nutrition, which are considered high-potential pursuits.

For example, nutrient supplements grew 20.5 percent, reflecting rising consumer demand for health-related products in the first quarter, according to the China Shopper Report.

The company has tapped these trends, such as creamier dairy products and coconut beverages used in food-service channels, functional foods for seniors, dietary supplements, and cheeses as by-products of deep dairy processing.

"Based on our deep knowledge in the local market, together with the global perspective and resources, Tetra Pak is well-prepared to innovate with our customers and deliver our unique values in the Chinese market," Zhu said.