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Fonterra set to build processing plant to expand interests in China

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September 25
9:17 AM 2013

The world's largest dairy producer, Fonterra had laid out plans to launch its own milk formula brand in China. This plan is regardless of a recent botulism scare and the latest crackdown by the Beijing government on foreign firms for corruption.

China has become a haven for foreign milk formula manufacturers because of its USD12.4 billion market that is expected to double when 2017 comes around. The issue now though is that foreign firms are under the gun, as more and more companies are being charged with bribing medical staff to offer their products to the new mothers under their care.

The goverrnment had also imposed a fine on a number of foreign milk formula manufacturers totalling USD110 million for alleged price manipulation. 

Fonterra Co-operative Group, based out of New Zealand, is owned by nearly 10,500 farmers and its main business is the delivery of 90% of milk powder imports of China. It does this by selling raw material to other companies to produce consumer goods from infant formula to frozen pizza to cheese. It had avoided producing its own branded baby formula since the 2008 poisoning incident, after Chinese dairy firm Sanlu added melamine to increased its infant products, resulting in the death of six infants and thousands being hospitalized after taking ill.

Now the company's expansion pkans include the construction of a UHT milk processing plant to be operational by 2016. This is in line with its global objective of increasing earnings from value added products instead of focusing on lower margin bulk milk products.

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