New Zealand dairy co-operative Fonterra Co-operative Group Limited and Chinese infant food manufacturer Beingmate intend to form a global partnership that will help meet China’s growing demand for infant formula.
The partnership will create a fully integrated global supply chain from the farm gate direct to China’s consumers, using Fonterra’s milk pools and manufacturing sites in New Zealand, Australia, and Europe.
The partnership is intended to increase the volume and value of Fonterra’s ingredients and branded products exported to China.
It will be achieved in two phases – Fonterra will shortly start the process to issue a partial tender offer to gain up to 20% stake in Beingmate.
After gaining regulatory approvals and Fonterra satisfactorily completing the partial tender offer, the two companies will set up a joint venture to purchase Fonterra’s Darnum plant in Australia and will establish a distribution agreement to sell Fonterra’s Anmum brand in China.
Fonterra chief executive Theo Spierings said the partnership will play a part in promoting leading product quality and safety standards in the infant formula market in China, participating in the ongoing development of the Chinese dairy industry, and supporting the development of Beingmate’s business.
“By working together with Beingmate, we will strengthen our infant formula brand presence in China and link the country to high quality ingredients from New Zealand, high value paediatric products made at Darnum in Australia, and whey specialty ingredients manufactured at our new plant in Heerenveen in the Netherlands and in alliance with Dairy Crest in the UK,” said Spierings.
“We will also work with Beingmate to evaluate mutual investments in dairy farms in China.”
He said by working alongside Beingmate, the partnership will participate in growth in a category where there is huge demand.
“The infant formula market in China is worth about NZ$18 billion today and is expected to be worth NZ$33 billion (US$27.64 million) by 2017. This growth is driven by increasing urbanisation, higher disposable incomes, a preference for premium brands, and relaxation of the one child policy,” he said.