Fonterra Eyes China

October 3, 2011 01:09 PM

Global dairy leader Fonterra Co-operative Group says the company is moving ahead with plans to build dairies in China.

Before he stepped down as Fonterra’s CEO earlier this year, Andrew Ferrier told the Wall Street Journal that the steady rise in global consumption of dairy products is spurring Fonterra to expand its overseas operations. The Auckland, New Zealand–based company already produces about a third of the world’s internationally traded dairy products. It supplies 140 worldwide markets with milk, cheese and yogurt.

"The underlying factors that underpinned food price inflation in 2007 and 2008 have not gone away: growth in population, wealthier societies looking for more food," Ferrier noted.

Fonterra is building its third dairy in China. The 3,200-cow dairy is expected to increase Fonterra’s overall milk production in China to 360 million cups of fresh milk every year.

"We expect to be involved in multiple farms that can supply fresh milk into the Chinese economy," Ferrier said.

In the wake of China’s 2008 melamine milk-powder scandal, Ferrier said, Fonterra felt some obligation to help the Chinese get back on their feet.

"It was a tragic thing that happened," he told the newspaper. "It showed the lack of control within their supply chain. We want to make sure that we are running the business that is producing the milk [in] every step of the operation."

Fonterra’s former top executive said the cooperative knows it cannot feed dairy’s growth opportunities from New Zealand, with its size limitations. He also pointed out that China’s farming model is different than New Zealand’s. "In China, we have to bring grain to the cows," Ferrier said.

Fonterra is also discussing opportunities with key players in India. "Traditionally, they have been self-sufficient in dairy, but it is looking like their consumption is going to grow faster than they can produce it," Ferrier said.


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