Fonterra announces ‘game changer’ Chinese partnership

Fonterra [NZX: FCG] is partnering with Chinese infant food manufacturer Beingmate to help meet China’s growing demand for infant formula.

By using Fonterra’s milk pools and manufacturing sites in Australasia and Europe, the partnership intends to create a fully integrated global supply chain from the farm gate directly to China’s consumers.

Fonterra will shortly start the process to issue a partial tender offer to gain up to a 20% stake in Beingmate.

After gaining regulatory approvals and Fonterra satisfactorily completing the partial tender offer, Fonterra says it and and Beingmate will set up a joint venture to buy 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 says the partnership will be a game changer that will provide a direct line into the infant formula market in China.

“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 UK,” Mr Spierings says.

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

 “China is our No 1 market and the proposal to join forces with Beingmate will be an important building block in Fonterra driving volume and value and taking a step forward in terms of being a globally relevant co-operative,” Mr Spierings says.

Fonterra chairman John Wilson said Fonterra has been committed to being a part of China’s dairy industry and contributing to its development for many years. 

“Fonterra is already playing its part in the creation of a vibrant, local dairy industry through our farms investment, sharing technical expertise, providing high-quality imported ingredients to local food manufacturers and innovative dairy solutions to the foodservice sector,” Mr Wilson says.

“We are looking for this global partnership to take our relationship with China and its consumers to a whole new level. It will benefit Fonterra, Beingmate and all our stakeholders and is part of our drive to increase returns to our farmer shareholders,” Mr Wilson says.

“The proposed partnership is well-aligned with the Chinese government’s desire to see a strengthened focus on quality and consumer safety in the local dairy industry,” Beingmate’s Zhentai Wang says.

“We believe this global partnership will play a constructive role in the development of China’s and the global dairy industry as both parties work together to drive a two-way flow of capital, technology, supply and distribution.”