November 15, 2005

Fonterra to produce milk in China

New Zealand-based dairy giant Fonterra would invest in Chinese dairy companies so the company could produce milk in China, Chief Executive Andrew Ferrier said. He added that this move would "complement our exports from New Zealand."

Ferrier said two years ago, Fonterra's leaders had expected enormous market opportunities for the company's products in China, as mainland companies were seen unable to produce enough to meet domestic demand.

However, reports stated the leaders have changed their views now. Fonterra planned to export their products to China while investing in local production at the same time.

China presented a huge opportunity for Fonterra in light of growing domestic milk consumption there, in part due to rising affluence.

According to the UN's Food and Agriculture Organization, retail dairy sales in China was expected to rise 55 percent to US$7.9 billion (about NZ$11.63 billion) by 2009.

In 2004, China's milk production rose 25 percent, while Chinese consumed an average of 13 kilograms of dairy products a person, compared with 5 kilograms in 1994.

The world average is 100 kilograms, according to the UN.

Meanwhile, Ferrier said the company was already negotiating a joint venture with local partners. Fonterra has reportedly been engaged in discussions with Sanlu, a major Chinese dairy brand, about a possible joint venture with a stake of 39 percent in the Sanlu business.