NZ's Fonterra buying stake in mainland dairy processor

PUBLISHED : Wednesday, 27 August, 2014, 9:34am
UPDATED : Thursday, 28 August, 2014, 4:34am

Fonterra Cooperative Group, the world's biggest dairy exporter, said it will pay NZ$615 million (HK$3.97 billion) for a stake in a mainland infant formula maker as it seeks to tap the nation's lucrative baby milk market.

The New Zealand company is seeking a stake of as much as 20 per cent in Beingmate Baby & Child Food, a subsidiary of the mainland's fourth-largest infant formula maker, it said yesterday. The companies are also planning a joint venture to buy Fonterra's Darnum plant in Australia and a distribution agreement to sell Anmum, Fonterra's own baby milk brand, on the mainland.

The alliance comes a year after a whey protein-scare prompted product recalls across Asia by baby formula makers such as Danone and Abbott Laboratories and also caused a temporary halt on imports to the mainland. Fonterra said its baby formula may have been tainted with a potentially fatal botulism-causing bacteria. The incident later proved to be a false alarm.

The tie-up with Beingmate is "a game changer that will provide a direct line into the infant formula market in China, which is the biggest growth story in paediatric nutrition in the world," chief executive Theo Spierings said.

The mainland infant-formula market is worth NZ$18 billion and will grow to NZ$33 billion by 2017, Fonterra said. The dairy firm already sells Anmum supplements for pregnant women in the Asian nation and started sales of its Anmum-brand infant formula in the southern mainland city of Guangzhou last year.

Hangzhou Beingmate Group, the parent of Beingmate Baby, is the mainland's fourth-largest infant formula maker with 9.9 per cent of the market last year, according to Euromonitor. The mainland baby milk market is dominated by foreign companies with Mead Johnson Nutrition being the largest, followed by Nestle and Danone, Euromonitor data shows.

Foreign infant formula makers gained market share on the mainland as consumers lost confidence in local brands after domestic baby milk powder tainted with melamine killed six babies in the country in 2008.

Fonterra is forging alliances and developing farms on the mainland to tap demand for milk in the world's second-biggest economy. The mainland is the largest customer for New Zealand dairy products, which account for almost a third of the nation's exports.

The co-operative, which makes products such as Anchor butter and Anlene milk, has faced some roadblocks on the mainland. Mainland authorities fined Fonterra and other overseas companies about 4.5 million yuan (HK$5.66 million) in August last year for fixing product prices.