August 14, 2009

Fonterra Co-operative Group Ltd., the largest company in New Zealand, has reaffirmed its confidence in the Chinese market and promises to bring more products and make more investment in a nation with 1.3 billion potential consumers.

 

Andrew Ferrier, Fonterra CEO, said that one of the company's priorities is to help build a safe supply chain in China while continuing its exports of high quality dairy products.

 

Fonterra has set up a dairy farm in Hangu, in the city of Tangshan of Hebei province, and has the option to start more dairy farms in cooperation with Chinese partners, he said.

 

The Chinese government had done a very good job in food safety and Fonterra would play a role in helping build a safe supply chain in China, he added.

 

Fonterra has a cow-to-consumer supply chain in New Zealand, and has introduced management expertise to the Tangshan operation, which is 85 percent owned by Fonterra.

 

Philip Turner, managing director of Fonterra China, said that the US$20.7 million Tangshan dairy farm is now one of the best in China. By this time next year, its number of cows is projected to increase from the current 4,500 to 6,000, marking full operation of the project.

 

While China is an enormous dairy market - registering double-digit annual growth and a demand of 27 billion liters last year - its per capita consumption is still low, creating huge potential for growth.

 

Fonterra sees a clear opportunity for more joint venture farms with best practice processes. Chinese partners can supply capital while Fonterra has the farm and management experience.

 

The dairy giant is also moving forward in the retail segment with two new milk powder products set to hit markets in east and south China. One is Anlene high-calcium milk powder that helps prevent bone loss. The other is Anmum for pregnant women, Turner said.

 

Fonterra had five percent of China's dairy market last year. Combined sales of foreign dairy products comprised about 12 percent of the total, said Turner.

 

He noted China is the world's most open dairy market that there are many opportunities for his company and it is committed to a long-term development strategy.

 

One of the world's ten-largest dairy companies, Fonterra has four million pasture-fed cows, produces up to 20 billion liters of milk and exports its dairy products to about 140 countries. Its sales revenue reached US$13.45 billion for the 14 months to July 31, 2008.