WELLINGTON, July 11 New Zealand dairy
co-operative Fonterra and U.S. healthcare company
Abbott are planning to build up to five dairy farms in
China to secure domestic supply to meet rising demand for milk
in the world's second-largest economy.
In a statement issued on Friday, the world's largest dairy
exporter and Abbott, a major infant formula seller in China,
said they had signed a $300 million agreement to build up the
farms in one of the world's fastest growing dairy markets, which
would produce up to 160 million litres of milk each year.
The planned hub, whose location is yet to be decided, would
be Fonterra's third, following similar dairying centres in
China's Shanxi and Hebei provinces. If the plan is approved by
Chinese authorities, the companies said the first farm would
begin producing in early 2017.
"Farming hubs are a key part of our strategy to be a more
integrated dairy business in Greater China, contribute to the
growth and development of the local Chinese dairy industry and
help meet local consumers' needs for safe, nutritious dairy
products," Fonterra Chief Executive Officer Theo Spierings said
in a statement.
The deal would build on the existing relationship between
the two companies, as Fonterra counts Abbott as a wholesale
client of its milk powder products, which include Similac infant
Abbott is expanding its production capabilities in China,
opening an infant formula plant near Shanghai in June.
"This strategic partnership gives us flexibility for the
future on however we use milk," an Abbott spokesman said.
Abbott recalled some of its milk formula brands in China and
Vietnam in August after a contamination scare involving
products containing Fonterra-produced ingredients, which proved
to be false.
Abbott in April said the recall crimped sales of milk
formula products by $75 million in the first quarter.
Global milk formula makers are pushing to capitalise on
increasing dairy demand from China, where growing middle classes
are developing a voracious appetite for cheese, milk formula and
(Reporting by Naomi Tajitsu; Editing by Cynthia Osterman)