July 28, 2016

New Zealand’s Mataura Valley Milk announced plans to construct a $200 million nutritional dairy powders plant in partnership with China’s state-owned China Animal Husbandry Group.

China Animal Husbandry will take a 71.8% stake in Mataura Milk with the company’s supplier-farmers holding 20%; New Zealand-based dairy business, BODCO will hold 5.6%, and the remaining stake will be held by New Zealand domestic investors.

After eight years of working to launch the project, construction is scheduled to begin this October, according to NBR. The state-of-the-art plant will manufacture infant formula, UHT cream and low volumes of skim milk powder from locally-sourced raw milk.

“Anything this size and scale does take a significant investment of time and money to find a partner,” Mataura director Aaron Moody told BusinessDesk. “There have been a number of discussions over the years – I think they were very close in 2008, but I understand at the time the global financial crisis (GFC) had an impact on the partner they were working with then.”

Although the global economic crisis was felt across all industries, the infant nutrition category was better insulated than most. In 2009 when the downturn began to negatively affect businesses, the infant formula category grew by 7% in value, according to Zenith International, mainly due to population growth and a climbing standard of living in emerging economies. In 2013, the global infant formula market was worth $57 billion, with China’s infant formula market expected to reach a value of $38 billon on its own by 2017. Meanwhile, in Africa and the Middle East there are expected to be 7.3 million more children in the 0-3 year age group by 2018 than there were in 2013.

“The appetite for nutritional powders is huge with China’s imports of infant formula growing by 51% in the 12months to February 2016,” said Mataura director, Aaron Moody. “Importantly, the price for infant formula and growing up milk powders is less reliant on the global commodity dairy price,” he added.

The New Zealand-based plant will be an extension of China Animal Husbandry’s dairy operations, and minority shareholder, BODCO, which is 40% owned by China Animal Husbandry, will package and distribute the products from the factory. Mr. Moody told the Otago Daily Times, that having a Chinese partner will help the business navigate the recently changed Chinese regulations regarding infant milk production and distribution.

The project has already secured approval from both the New Zealand Overseas Investment Office and the Chinese government.

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Lynda Kiernan