Fonterra to acquire 20% stake in Beingmate, expand capacity in New Zealand

New Zealand-based co-operatively owned company Fonterra is to acquire a 20% stake in Chinese infant food manufacturer Beingmate and will also invest close to $555m in expanding its milk production units in New Zealand.

Fonterra will form a global partnership with Beingmate with a total investment of $615m, tod help meet China’s growing demand for infant formula and also promote the improvement of product quality and safety standards in the country.

With the partnership, Fonterra aims to create an integrated global supply chain from the farm gate direct to China’s consumers, using its milk pools and manufacturing sites in New Zealand, Australia and Europe.

Fonterra CEO Theo Spierings said: "By working together with Beingmate, we will strengthen our infant formula brand presence in China and link China 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 United Kingdom.

"We will also work with Beingmate to evaluate mutual investments in dairy farms in China."

Beingmate chairman Wang Zhentai said: "Working together with Fonterra, we will create globally competitive, safe and secure supply chains to deliver high-quality, advanced dairy nutrition to meet the needs of China’s growing population as well global consumers. The partnership will see our business take a significant step forward in its globalisation ambitions."

Speaking about the expansion plans in New Zealand, Spierings said that the investment will help the co-operative to increase its processing capability and optimise production.

He added: "Our strategy is to increase earnings by driving more milk volume into higher value categories globally by turning the wheel from commodities to higher-margin products.

"By creating more options for our New Zealand operations we are better placed to be able to make the product mix that delivers the greatest returns to our farmers and meet the needs of our consumers and customers worldwide."

As per the current plan, Fonterra has approved the establishment of a drier at the Lichfield site in South Waikato and three plants at the Edendale site in Southland.

Spierings noted that the infant formula market in China is worth about NZ$18bn, and it is expected to be worth around NZ$33bn by 2017.