As part of the ongoing trend of Chinese dairy companies expanding overseas, China’s Yili Industrial Group Co. is building a milk powder plant in Kansas in partnership with Dairy Farmers of America Inc. under its year-old strategic alliance with the U.S. cooperative. Under the terms of the agreement, Yili, China’s second biggest diary producer after China Mengniu Dariy Co., will invest $30 million, and Dairy Farmers of America will invest $70 million toward the construction of the plant which will have the capacity to produce 80,000 tons of milk powder per year. China’s 2008 melamine scare caused Chinese dairy companies to seek out partnerships with overseas producers to gain credibility with Chinese consumers, while partnerships with Chinese dairy companies give foreign producers easier access to the Chinese market which is growing at approximately 10% per year. So far this year Chinese companies have invested $8.4 billion in 11 deals compared to $86 million in three deals in 2010. Recently, China’s Mengniu has formed a joint venture with White Wave Foods Co., Royal FrieslandCampina NV agreed to a deal with China Huishan Dairy Holdings Co., private equity firm KKR & Co. formed a $140 million joint venture with China Modern Dairy Holdings, and France’s Danone has invested in two deals with China’s Mengniu.
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