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Fonterra and Beingmate team up on China baby formula

New Zealand dairy giant Fonterra announced a joint venture with Hangzhou-based Beingmate Group on Wednesday (Aug 27) aimed at increasing its presence in the multi-billion dollar Chinese infant formula market.

WELLINGTON: New Zealand dairy giant Fonterra announced a joint venture with Hangzhou-based Beingmate Group on Wednesday (Aug 27) aimed at increasing its presence in the multi-billion dollar Chinese infant formula market.

Chief executive Theo Spierings said Fonterra, which was involved in a botulism scare last year, would spend about NZ$615 million (S$642 million) acquiring a 20 per cent stake in Beingmate under the deal. The companies will then form a joint venture to sell Fonterra's premium Anmum baby formula brand in China.

New Zealand already exports formula worth around US$3.0 billion a year to China, the bulk of it sourced from Fonterra, and Spierings said the Beingmate deal was a "gamechanger" for the dairy cooperative. "The infant formula market in China is worth about NZ$18 billion today and is expected to be worth NZ$33 billion by 2017," he said. "This growth is driven by increasing urbanisation, higher disposable incomes, a preference for premium brands and the relaxation of the one-child policy."

Fonterra also said it would invest NZ$555 million in new dairy processing facilities in New Zealand, boosting capacity to help meet burgeoning global demand. Fonterra currently supplies whey products to formula companies that sell in China but does not distribute its own brands there.

The products were at the centre of a botulism scare that sparked international recalls last year that eventually turned out to be a false alarm but left New Zealand producers scrambling to maintain the gold-standard reputation they have long enjoyed in China. Fonterra also part-owned a Chinese company involved in a 2008 scandal in which six children died and another 300,000 fell ill after milk was illegally laced with the chemical melamine.

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