March 19, 2014
Synutra's investment in the largest milk-drying factory in Charhaix, in the Brittany region of France, is the first infant-formula plant in France fully owned by a Chinese company, Wall Street Journal reports.
The plant feeds two needs. China's voracious demand for infant formula is surging as the middle class flourishes. But since a 2008 scandal, when Chinese-made formula tainted with the industrial chemical melamine killed six infants and sickened 300,000, parents have preferred to buy formula from well-known Western brands. Now, dairy companies in China, already the world's largest importers of milk, are racing to win back consumers by tying up with producers abroad.
At the same time, Chinese investment offers a lifeline to Brittany, a farmland on the western tip of Europe that has been hurt by the unwinding of European subsidies. As part of its deal, Synutra agreed to hire around 100 employees of a cheese factory due to shut its doors next year, on top of another 150 from the region.
Synutra plans to ship the entire output from its new plant swiftly to China. The company teamed up with French dairy cooperative Sodiaal to secure access to 300,000 million litres of milk a year over the next decade and 30,000 tonnes of whey, which will be transformed into dried baby milk.
France—Europe's second-largest dairy producer behind Germany—already exports to China the bulk of its dried milk used for infant formula, with last year's shipments jumping 41% from 2012.
Not all Bretons are enthusiastic about China's arrival. "It scares me a little that the Chinese will hold the power to negotiate milk prices," said Hervé Guilloux, a local farmer who delivers his milk to Sodiaal. "Our point person will be even further away than Sodiaal's headquarters in Paris, against which we are already powerless," he added.
However, mayor Christian Troadec said that allowing Chinese or other foreign investors into the food industry will boost growth in a region where local firms are overly dependent on the domestic market and often lack the capital to expand.
"Bretons must stop putting all their eggs in the one basket," he said.