RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Fonterra accelerates China drive with Abbott deal

Twitter Linkedin

Fonterra accelerated its progress towards a target of producing 1bn litres of milk a year in China by signing a farm tie-up with healthcare group Abbott, the dairy operator's second foreign joint venture this month.

New Zealand-based Fonterra, the world's biggest dairy exporter, said that it and Abbott would invest a combined $300m in setting up a so-called "farm hub" in China, to produce "high quality dairy".

The operation, expected to start production in 2017 assuming it wins consent from Chinese authorities, will contain up to five farms, with a combined herd of 16,000 cattle, producing up to 160m litres of milk a year for the growing Chinese market.

Abbott is a big player in China's infant formula market, which is expanding in part thanks to the country's growing prosperity, but also thanks to a greater prevalence of working mothers.

The US-based group, which has announced more than $400m of investments in its China operations, last month opened a nutritional manufacturing plant in Jiaxing, and earlier this year opened two research centres in Shanghai.

Production target

Fonterra, meanwhile, which supplies dairy ingredients to customers such as Abbott, is seeking to develop in-country operations to meet the needs of its buyers in China.

After becoming embroiled in the 2008 melamine milk-tainting scandal, involving the Sanlu group in which Fonterra was a major shareholder, the co-operative has sought greater control over dairy operations in China.

The group has so far set up two dairy hubs in China, but their combined output of 300m litres a year falls well short of Fonterra's target.

"Taking a partnership approach for the third hub will enable us to progress its development quickly so that we can maintain momentum around our goal to deliver 1bn litres of milk in China by 2020," a Fonterra spokesman told Agrimoney.com.

"We have been open about seeking partners that will enable us to progress our strategy in China."

'Key avenue to growth'

The deal with Abbott is Fonterra's second tie-up this month, after it last week unveiled a joint venture with the UK's Dairy Crest to market galacto-oligosaccharide and demineralised whey, two dairy products used in making infant formula.

"We often look for opportunities where we can further our strategic relationships with key customers and partners," the Fonterra spokesman said.

Rabobank earlier this week highlighted the importance of joint ventures, as well as mergers and acquisitions, for large-scale dairy companies to maintain growth.

While the recovery in the world economy will boost dairy demand, "many markets will not return to the rapid growth rates seen before the financial crisis," the bank said, citing "mature" Western markets and slower growth in major developing countries.

"Ongoing high milk costs and increased competition for branded players will also pose a challenge.

"In this context, mergers, acquisitions and joint ventures will remain a key avenue to growth and profitability."

The bank also highlighted the quest by Western countries for exposure to the Chinese market, noting tie-ups between US-based Whitewave and China Mengniu, France's Danone and Cofco, and Dairy Farmers of America with Yili.

By Agrimoney.com

Twitter Linkedin
Related Stories

'Record number' of farms coming to market in top New Zealand dairy areas

Reinz flags "evidence" of a surge in farm listings, for reasons such as poor weather, and worries over a milk price retreat

Dairy groups sidestep shockwaves from GDT price slump

Indeed, shares in the likes of A2 and Beston soar. Still, that does not mean there are no losers from the dairy price falls...

Milk prices fall at GDT, defying headway in futures markets

Dairy prices at GlobalDairyTrade fall below year-ago levels for the first time since May 2016, after a recovery in New Zealand’s milk output

When teats are less controversial than Tweets

Russia’s government, while accused of spreading of fake news, is termed the real deal in farm support
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069