New Zealand partner stresses safety efforts
New Zealand dairy giant Fonterra, which owns a 43 per cent stake in Sanlu, said yesterday that it was working to ensure the safety of consumers, but a spokeswoman declined to answer further questions.
'Fonterra is pushing hard to make sure that Sanlu is working closely with China's government to ensure that everything that can be done is being done to protect the safety and health of consumers,' a company statement said.
Sanlu had advised its foreign partner of the quality problem and was recalling affected products in China, it said.
Fonterra, one of the top six dairy companies in the world by turnover, is not the first foreign firm to have a China-dairy-related venture turn sour.
Italy's Parmalat pulled out of the mainland market, and Groupe Danone of France has been locked in an acrimonious dispute with one of its Chinese partners, Wahaha.
When Fonterra bought its stake in Sanlu for a reported 864 million yuan in 2005, the future looked brighter. The partnership formally began in June 2006 and now operates 21 sites across China, making UHT (ultra-heat-treated) milk, yogurt and milk powder, Fonterra's website said.
Last year, Fonterra said it was setting up a model dairy farm with its domestic partner to bring its expertise to China. The world's leading exporter of dairy products, Fonterra is co-operatively owned by more than 11,000 New Zealand dairy farmers.
However, milk producers in China face narrow margins and a fragmented market, analysts said. Although demand for milk is growing, consumption per person is relatively low.
'It's a really tricky market,' said Paul French, publishing and marketing director of business consultancy Access Asia. 'It's incredibly difficult to get it up and running where there hasn't been a dairy industry, by and large, before.
'The problem for the foreigners ... was, they spent so much trying to get into the market and staying in there for two kuai [yuan] bags of milk.'
