FONTERRA’S PLANS to team up with Chinese infant food manufacturer Beingmate and form a global partnership to chase China’s ever-growing demand for infant formula is a smart move.
China truly is an Asian tiger whose hunger for dairy produce is unlikely ever to be sated. It is a clever strategic move by the co-op to team up with a Chinese partner to tackle this lucrative market.
The partnership will create an integrated global supply chain from the farmgate direct to China’s consumers, using Fonterra’s milk pools and plants in New Zealand, Australia, and Europe.
Fonterra claims this partnership will increase the volume and value of its ingredients and branded products exported to China. The proposal will see Fonterra and Beingmate set up a joint venture to buy Fonterra’s Darnum plant in Australia and make a distribution agreement to sell Fonterra’s Anmum brand in China.
Fonterra chief executive Theo Spierings describes the new partnership as a “game changer” that will provide a direct line into the infant formula market in China – the world’s biggest growth story in paediatric nutrition.
The term ‘game changer’ is used too often these days in referring to political announcements, sporting analogies, business and so on. But in this case it is appropriate, especially if the joint venture succeeds in promoting NZ dairy products as leading in quality and safety standards in China.
The lesson from last year’s botulism botch-up, and the San Lu disaster in 2008, is that Fonterra and New Zealand cannot afford damage to its reputation for providing high-quality, world-leading infant formula to the Chinese market. Hard-fought markets and value can be destroyed overnight.
China is our number-one market and this venture with Beingmate will be important in helping Fonterra drive volume and value and in stepping forward as a globally relevant co-operative.
As Spierings says, “The partnership with Beingmate will show the benefits of an integrated and secure supply chain where we are fast-tracking investment in milk processing capacity to meet global demand.”