December 16, 2006

Fonterra Group to build dairy farm in China

World's largest dairy Fonterra Group announced Dec 12 plans to invest in a 3000-head dairy farm operation in China.

The farm, Fonterra Group's first in China, is expected to come online in October 2007.

Fonterra Group is a leading dairy exporter worldwide. It paid RMB 864 million (US$108 million) for a 43-percent stake in Hebei San Lu Dairy Co, Ltd late last year, the largest foreign investment in China's dairy industry.

With booming demand for dairy products, the company sees China as an immensely attractive market.

China's milk output is expected to rise to the current 22 billion litres to 40 billion litres in seven years. The company said it would continue to import dairy products from New Zealand to satisfy market demand while producing high quality liquid milk in China. The company said maintaining a high quality product is key to ensuring growth in the Chinese market and setting up a dairy farm in China itself provides a means to do so. 

Hebei province, where Sanlu is based, is one of China's largest milk-producing regions. However, due to the rapid growth in the company and soaring milk demand, the company has had to source for new supplies by expanding its milk-production base. 

Although talks are still on-going with the government as to the site of the farm, it is expected the location would be in close proximity to Sanlu's current facilities.

Fonterra Group produces more than 1.95 million tonnes of milk a year, or one-fifth of New Zealand's production. Currently, it is marketing three main products in China, the first being the Anjia Butter popular in China's food industry, the second being the Anyi milk powder and the third is the raw ingredient supply for dairy products.