Fonterra to produce milk in China

Fonterra has plans to export milk products to China while simultaneously investing in local production, according to news reports.

“A joint venture would be the first step in what we hope will develop into a number of investments throughout China,” says Andrew Ferrier, Fonterra chief executive. “I wouldn’t be surprised if China evnetually accounts for 10% of our overall market.”
China’s milk production increased by 25% last year, up to 13kg per person per annum, and the government there is encouraging dairy consumption to improve nutrition, the China Business Weekly reports.
China is, however, the largest market for milk powders, with 895,391 tonnes consumed in 2004, according to the US Department of Agriculture. Similarly, chinese milk production is growing – herds are expected to increase 29% to 11.5 million cows this year, after a 30% rise in 2004, the USDA notes.
Fonterra is currently negotiating a joint venture with local partners, and has been reported to be talking to Sanlu, one of China’s leading brands, about a 39% stake. Meanwhile, Danone Groupe recently upped its stake in China’s Bright Dairy to more than 11%. Arlan Foods has begun a joint venture with China Mengniu Dairy Co as well.