Yili-owned Oceania Dairy opens stage two of South Island plant

The opening by Chinese dairy giant Yili Group of its stage two development at Oceania Dairy's Glenavy production plant takes its total investment in the south Canterbury dairy processor to $600 million.

The latest investment includes a new UHT plant, infant formula canning line, a whole milk powder dryer, and facilities to manufacture UHT milk products and lactoferrin.

When fully operational, the plant will be able to process 16.2 tonnes of functional protein dairy product, 80,000 tonnes of UHT, increase its production of whole milk powder from 33,000 tonnes to 56,000 tonnes, and make 30,000 tonnes of infant formula.

Oceania Dairy was purchased in early 2013 by Yili, its first major offshore dairy investment after the previous owners failed to raise enough funds to build their own dairy factory. Yili built a $236 million milk processing plant on a 38-hectare block of land at Glenavy which began processing milk in the 2014 season.

The company says the completion of the stage two development will provide a significant economic boost to the region, including for farmers and milk suppliers. Yili hasn’t yet announced the guaranteed set price it will pay for the new season though it typically pays above Fonterra’s forecast price.

Presently it has 67 farmers who supply milk to Oceania Dairy and is seeking to recruit more to meet its growing production needs. More than 90% of staff are local residents and it is also on a recruitment drive to beef up staff numbers.

Yili Group chairman Pan Gang says his company is fully committed to New Zealand, as evidenced by the on-going investment at Glenavy.

Oceania Dairy narrowed its annual loss to $16.3 million in 2015, from a loss of $17.6 million in 2014, its first full year of production. Revenue rose to around $141 million in 2015 from $34 million a year earlier. Most of its production is shipped to the group’s own factories and supply chain in China.

Yili (Inner Mongolia Yili Industrial Group) has a memorandum of understanding with Lincoln University, basing its own Oceania Dairy research and development manager Dr Philip Wescombe at the university. The original memorandum of understanding said it would explore initiatives in dairy farm and dairy processing technologies, value-add dairy products and ingredients, develop efficiencies in dairy production, and enhance supply chain safety.

 “We think this joint venture will generate innovation to the benefit of not only Yili group but also the wider New Zealand dairy sector,” Mr Pan Gang says.

Yili is China’s largest dairy producer with an estimated 22% of the retail dairy products such as fresh milk, cheese, yoghurt and sour milk.  It is the world’s 8^th largest dairy company with annual revenues of $US8.6 billion last year.

According to Bloomberg News, China’s milk companies have been seeking to win back customers with new products and collaborating with dairy producers based outside of China after confidence in the industry was hit by a series of food safety scandals, including the 2008 death of infants from melamine-tainted milk.