Fonterra to take more active role in Chinese operations
New Zealand dairy giant Fonterra announced that it will increase its sales of milk to China directly exported from New Zealand, and improve the output of three its own farms in China.
Fonterra CEO Theo Spierings said the 2008 Chinese melamine incident taught the company that an integrated business model of controlling the whole production process from farms to customers is the best way to fully secure food safety. After the incident, the company suffered from losses of US$151 million in investments in China's SanLu Group, the maker of the first poisonous milk found in China. Since then, Fonterra has moved its business model to one focusing on integrated production chains instead of joint ventures.
The company expressed on July 19 that it plans to build a new world-class farm in China's northern Hebei province and raise its annual milk output to 90,000 liters. China is a growth market featured in the company's strategy, Spierings said. The country has become Fonterra's largest milk market, with two-digit growth. Philip Turner, CEO of Fonterra China, said the company expects milk demand in China to triple by the end of 2020.
In addition to its export business, the company will focus on local milk sourcing in its China business layout. The company does not transplant its natural pastures business model, which it applies in New Zealand, to China, but will build industrial pastures.
Still, the company will limit the number of milk cows to less than 5,000 for each farm, far less than Chinese companies, such as Mengniu and Modern Farming, where milk cows number more than 10,000 at a sin! gle farm .
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