Fonterra Sets Its Sights on India

June 28, 2011 08:17 AM

Following its move into China, the New Zealand dairy giant explores possibility of building dairies in India.


First, it was China. Now, it’s India.
New Zealand-based Fonterra Co-operative Group, a leading supplier of dairy ingredients to the world’s leading food companies, is eyeing India's booming demand for dairy products, the Wall Street Journal reported today.
Fonterra is exploring a dairy joint venture with Indian Farmers Fertiliser Co-operative and hopes to complete a feasibility study of the project in a year’s time, the newspaper said.
“We are still working through the process,” the newspaper quoted Fonterra director Greg Gent as saying. “We have to be sure that we understand all factors around farming in India. We want to be sure that our farm in India is successful.”
India is the largest producer of milk in the world, with an output of 112 million metric tons in 2010, according to the report. The country's National Dairy Development Board has forecast that the milk demand will reach between 180 and 200 million tons by the end of the decade.
Fonterra plans to continue exporting dairy and dairy products worth $200 million to India -- in line with the value it has been shipping over the last few years. It’s been supplying India’s food and pharmaceutical industries.
The relatively low dairy consumption in India means the potential is large for Fonterra's expansion plan. The joint venture may initially look to set up one or two dairy farms in India with a cost of about $40 million each, Gent told the newspaper.
Last October, Fonterra and the Government of Yutian County of China formally agreed to develop a new Fonterra dairy farm in Yutian County, Hebei Province. 
Fonterra’s $31.3 million (U.S) investment signals the next step in its strategy to expand local milk production on the ground in China, following the successful pilot of Tangshan Fonterra Farm.
“China is a very important market for Fonterra, and we’re committed to developing and investing in the local dairy industry over the long term,” Fonterra CEO Andrew Ferrier said. “The fast-growing demand for dairy in China will be met by locally produced milk and we want to be working alongside the local dairy industry to help meet this demand.”

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