Fonterra invests $30m in Hebei dairy farm

(China Daily)
Updated: 2010-10-21 14:16
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Fonterra invests $30m in Hebei dairy farm

Dairy cows rest in the sun at Lutz Farm, which supplies milk to Fonterra Co-operative Group Ltd, in Otaki, New Zealand. Fonterra Co-operative Group Ltd on Wednesday announced an investment of 200 million yuan ($30 [Photo/Agencies] 

BEIJING - New Zealand Fonterra Co-operative Group Ltd, the world's biggest dairy processing company, on Wednesday announced an investment of 200 million yuan ($30 million) in a dairy farm in Yutian, Hebei province.

The milk giant will transport 3,000 New Zealand cows to Yutian, where it expects an annual output of 32 million liters.

"We believe China's growing demand for high-quality dairy products will be met by locally produced milk supply," said Fonterra Chief Executive Officer Andrew Ferrier.

According to the company, the Yutian farm will be ready for milking in November 2011. It will focus on providing fresh milk and related products such as yogurt and infant formula to local consumers.

Fonterra said in 2007, when it set up a joint farm with Sanlu in Tangshan, Hebei province, that it would build five to six dairy farms in China within the next few years.

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Fonterra's turnover in China, covering locally produced and imported dairy powder and other dairy products, reached NZ$1.3 billion ($854.23 million) in 2009, up nearly 10 percent from 2008.

Fonterra's joint venture farm with Chinese dairy company Sanlu Group Co was launched just before the melamine-tainted milk powder crisis in September 2008. The crisis caused Fonterra to lose almost all of its $107 million investment in Sanlu.

Ferrier said that this case further highlighted the importance of dairy supply chain safety and encouraged his company to set up farms in China.

According to Philip Turner, managing director of Fonterra China, the farms would be located in Hebei province because it is especially close to big cities such as Beijing and Tianjin.

"Fresh milk and dairy products have to be sold near the production area, this amount of investment by Fonterra will definitely have an impact on local dairy companies, especially Beijing-based Sanyuan Foods Co Ltd," said Wu Zhengwu, a beverage industry analyst from Aijian Securities.