Global Dairy, a Heilongjiang-based formula milk producer, will invest HK$350.9 million to establish its first dairy farm to ensure stable supply and quality of raw milk.
The dairy product manufacturer, which listed on the Hong Kong stock exchange in October, said the farm would be able to supply 45 to 50 per cent of the raw milk consumed by the company after it comes on stream at the end of next year.
The company is one of many mainland dairy products makers, including Mengniu and Yili, that have been trying to strengthen the supply chain since a tainted-milk scandal rocked the industry in 2008.
Global Dairy said the farm, on the outskirts of Wuchang city in Heilongjiang, will cover 333,000 square metres and be able to carry up to 10,000 cows. It is estimated to generate up to 42,000 tonnes of fresh milk and 20,000 tonnes of bio-organic fertiliser annually.
'Building dairy farms is a missed lesson for all Chinese dairy companies,' said Zhao Yu, chief executive of the company.
In the the past, most dairy companies on the mainland relied heavily on private milk collection stations as their major source of raw milk, investing very little in building their own farms.
In 2008, a wide range of dairy products made by local companies were found to contain the banned chemical melamine. At least six babies died and hundreds of thousands of others suffered from kidney stones and other diseases. Investigations revealed that some farmers and milk collection stations added the chemical to raw milk before selling the product to dairy companies.
Major companies such as Mengniu, Yili and Bright Dairy vowed to build more self-run farms as well as expand the existing ones following the scandal. Modern Dairy, the largest milk supplier to Mengniu, will list in Hong Kong on Friday. The company, which runs 11 farms and has 72,000 cows, says the demand for high-quality raw milk in China is soaring.
Global Dairy plans to acquire more land for dairy farms. It will also seek new ways to collaborate with local dairy farmers by managing their cattle and sharing profits with them.
The company has three brands - Daqing, Emilon and C plus and its products are sold in 21 provinces.
Global Dairy's farm will have up to 10,000 cows, and involve an investment in Hong Kong dollars of: $351m