Fonterra reports China milestone, looks to India

By Ankush Chibber

- Last updated on GMT

Related tags Fonterra Milk

New Zealand-based dairy giant Fonterra is now looking at expansion in India after a successful foray in China, including a recent bumper bond listing in Shanghai.

Farmer-owned Fonterra, which is the largest processor of milk in the world, currently serves markets in Australia, Asia, Africa, the Middle East and Latin America.

On June 17, Fonterra announced that it had successfully raised 300m Yuan (US$42m) through an issue of CNH (Chinese Yuan deliverable in Hong Kong) denominated bonds. This is significant as it marked the first time that Fonterra had issued debt denominated in Chinese Yuan, and it also became the first Australasian corporate to tap the CNH market.

According to a statement issued by Fonterra, quoting Fonterra China president Philip Turner, the funds raised would be used to support the growth of Fonterra’s China business, based in Shanghai.

The funds, according to Turner, would be deployed to expand the geographical distribution of the company’s consumer brands and foodservice dairy products from seven cities to more than 15 cities in China over the next three years.

The company will also use the funds for the rapidly expanding distribution of its foodservice products into tier 2 and 3 cities in China, as well as exploring opportunities to produce and sell a range of dairy ingredients and setting up a farm business.

Nick Stride, a communications executive for Fonterra, said the company has operated in China for more than 30 years.

“Though we do not have any formal commercial partnerships at present, we are importing dairy ingredients and we have a foodservices business supplying restaurants and cafes, and a dairy farm in Hebei Province,”​ he said.

India next on the map

Stride said that India is on the expansion plan for Fonterra over the next few years, with plans for China underway at the same time.

“India has 17 per cent of the world’s population and 20 per cent of the world’s children, but dairy consumption is low by western standards and there is significant potential for growth,”​ he said.

In November last year, Fonterra had signed a Memorandum of Understanding with the Indian Farmers Fertilizer Co-operative (IFFCO) and dairy farms promoter Global Dairy Health Pvt to jointly conduct a feasibility study into a pilot dairy farm in India.

If it were to proceed, in phase one the pilot farm could have a herd size of around 3,000-5,000 cows, Fonterra said at that time.

“The feasibility study is still underway to establish whether a pilot farm can be set up in India,”​ said Stride.

However, Stride made it clear that it was yet to be determined if Fonterra would form a joint venture with the two companies if the farm were to be set up after the study.

India and New Zealand are also currently negotiating a Free Trade Agreement (FTA) under which trade norms in various sectors including the dairy trade are under discussion.

“In general, the FTA if signed will help Fonterra and other New Zealand companies with Intellectual Property that could be advantageous to Indian agriculture, to develop relationships with players in the Indian market,”​ noted Stride.

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