BEIJING, June 14 Leading Chinese dairy firm
Mengniu plans to spend up to 3.5 billion yuan ($550
million) by 2015 to source all its fresh milk from large-scale
farms, phasing out the small farmers who currently provide about
one-fifth of its milk, the company said on Thursday.
The Chinese government ruled in 2009 that dairy processors
must control at least 70 percent of the raw milk they use, in an
attempt to address widespread problems of contamination and poor
quality in the industry, after at least six babies died of
kidney failure after drinking formula made from milk adulterated
with the chemical compound melamine in 2008.
Mengniu currently buys about 82 percent of the milk it
processes from large-scale farms, according to the company's
announcement on its Twitter-like Weibo feed.
"We are trying to eliminate small farmers to shift to scale
farms," a Mengniu public relations official, Chris Kwok, told
"Scale farms have advantages. Quality of cattle, control and
feeding will all be enhanced. Scale means more modern methods."
China's food industry suffers from "non-standard management"
and hidden safety risks, the State Council or cabinet said on
Wednesday. It pledged more government supervision along the
supply chain, streamlined testing standards, stricter
punishments, and prizes for food safety warnings from the
Some of the larger industrial farms supplying Mengniu are at
least partly owned by the firm while others have exclusive
supply contracts, Kwok said.
Mengniu said it would spend 30 million yuan this year to
improve controls over the purchasing and producing of its milk.
It plans to start building between eight and 12 farms
containing up to 10,000 cows each this year.
Mengniu supplier Modern Dairy said late last year
that it would add four farms by June of this year, increasing
the number of cows at the 20 farms under its control to 150,000
cows. KKR & Co holds a 24-percent stake in Modern Dairy.
Dairy farms with more than 1,000 cows receive 1.5 million
yuan in central and local government subsidies, the China Daily
said on Thursday.
($1 = 6.3691 Chinese yuan)
(Reporting By Lucy Hornby; Editing by Chris Gallagher)