In 2006, Modern Dairy built its first farm in the eastern Chinese province of An’hui, with the intention of raising dairy cows and selling raw milk to branded dairy companies for processing into various dairy products.
1. Building out management
One of the first things KKR did to spur growth at Modern Dairy was to help the company recruit key organisational positions it needed to improve operations.
While enhancing business performance using tried and tested methods of operational improvement is something all private equity firms with operations teams strive to accomplish, few have had to deal with the unique set of challenges that come with having to use live cows to produce their core product.
3. Feeding growth
As you’d expect, animal feed is a big deal when you’re dealing with this many cows.
In order to preserve and ensure further growth, KKR helped the company secure insurance coverage for Modern Dairy’s most essential asset – its dairy cows.
As China’s raw milk industry continues to consolidate – individual farmers still supply about 95 percent of China’s raw milk, compared to roughly 50 percent in the United States, for example – Modern Dairy is planning to develop new products to generate revenue from a broader customer base, according to KKR.
So it seems that private equity and cows have a lot in common: continuous nourishment is the best recipe for generating a strong return.