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Fonterra reveals expansion plans in China

By Guy Montague-Jones , 03-Feb-2010

Fonterra is planning to build two new dairy farms in China as the company struggles to keep up with increasing demand.

After establishing a pilot farm in Hangu in 2007, Fonterra has built up its dairy business in China so that it is now ready to expand further.

The Tangshan Fonterra Farm in Hangu has reached full production levels ahead of schedule and Fonterra is now on the lookout for new sites to facilitate future growth.

Excess demand

Philip Turner, managing director for Fonterra China, said that the Chinese dairy industry is continuing to develop quickly and current supply of fresh milk cannot keep up with demand.

Fonterra said China is on track to become the biggest dairy market in the next few years and is forecast to experience double digit annual growth over the next 10 years. Along with New Zealand, Australia, and Latin America, China and the broader Asian region has therefore become a strategic target.

Possible sites

Fonterra has identified several possible sites for the new Chinese farms in Hebei Province and will consider partnering on the investment. But, Turner said Fonterra would want to have full management of the farms.

“It is important that we keep the next two farms in close proximity to Tangshan Fonterra Farm in order to achieve efficiencies in transport, milk supply and Fonterra management,” said Turner.

In addition, Turner said due diligence was already underway and the aim was to complete the final long-term lease agreement by mid-2010.

Each of the new farms is planned to be of similar size to Hangu, with around 35 hectares of land and around 3300 milking cows, creating employment opportunities to 350 people.