The world’s largest global milk processor and dairy exporter, Fonterra Co-operative Group, will develop a dairy farm hub in China.
Fonterra, a farmer-owned co-operative from New Zealand, is the world’s largest global milk processor and dairy exporter, with earnings of $1bn in 2013 on revenue of $18.6bn. The group signed an agreement with Abbott, a global healthcare company, which, if approved by Chinese regulators, would enable the group to expand its dairy business in China, a country where dairy consumption has been on the rise over the past 10 years.
Theo Spierings, chief executive of Fonterra, said this would be the co-op’s third farm hub in China and would be complement with their existing successful farming operations in Shanxi and Hebei Provinces.
“Farming hubs are a key part of our strategy to be a more integrated dairy business in Greater China, contribute to the growth and development of the local Chinese dairy industry, and help meet local consumers’ needs for safe, nutritious dairy products,” he said.
Miles D. White, chair and chief executive at Abbott, added: “We’re pleased to partner with Fonterra, a global leader in dairy science, on this alliance to build dairy capacity in China. This is a very important step in our growing commitment to Chinese consumers.”
Last August, Fonterra said it found bacteria in whey protein concentrate it produced. However, the products and the ingredients were subsequently found to be safe.
Figures published by OECD and the Food and Agricultural Organization in 2013 show that the total dairy product import growth (in milk equivalent) is projected to rise by about 60% in 2022 in China, compared to the base period 2010-2012. With an increased demand from Chinese consumers for dairy products, there is a potential for growing and developing China’s dairy industry.
Yves Pelle, partner and agricultural cooperatives european leader at Pricewaterhouse Cooper, said that as consumer behaviour changes, co-operatives also look at entering foreign markets, as Fonterra has done. Mr Pelle, who is due to speak at the International Summit of Cooperatives in Quebec, said that it was in the interest of big co-operatives to launch their products on other markets.
If Chinese regulators approve the strategic alliance between Fonterra and Abbott, the two will form a joint venture to invest a combined US$300 million (NZ$342 million or 1.8 billion RMB) into the farm hub. The hub will contain up to five dairy farms and more than 16,000 dairy milking cattle, producing up to 160 million litres of milk annually. The herd will comprise animals either imported, or sourced from Fonterra’s existing farm hubs.
The first farm is expected to be completed and producing milk in the first half of 2017 and the remaining farms will commence production in 2018. Fonterra aims to be producing one billion litres every year in China by 2018.