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Apr 25, 2012

New Zealand Fulfilling Growing Demand For Dairy Products in China

Fonterra dairy cooperative in New Zealand
is looking to raise capital to expand its dairy farming
operations in China.  To raise funds and sell shares,
it must receive agreement from its farmer-members.
Photo: 3 News, New Zealand
On 21 April 2012 the New Zealand government approved for a second time the sale of 16 of the Carfar dairy farms to Shanghai Pengxin, a Chinese investment company.  The sale had been approved in January 2012 but was under review as it was contested by a group of New Zealand investors who claimed that they would make more improvements than the Chinese investors.  This controversy highlights the growing market in China for New Zealand's milk exports and dairy expertise.  

Fonterra, a New Zealand based dairy cooperative and the world's largest dairy exporter has decided to try to meet China's growing demand for dairy products by expanding operations in this country. According to Philip Turner, President of Fonterra China, “The demand for milk in China is expected to triple over the next ten years, and much of this demand is for liquid and fresh milk products.

Fronterra built its first Chinese cooperative dairy farm in 2007 and its third in 2011. Fonterra CEO Theo Spierings has announced plans to build five farms with 15,000 dairy cows supplying 150 million liters of milk per year for the Beijing market. At least two of these would be in Hebei Province and would require a $100 million investment to build. Spierings noted that the company's long-term goal was 33 farms with 100,000 cows producing 1 billion liters of milk annually by 2020.

Structurally, Fonterra is a New Zealand cooperative dairy farming organization with 11,000 farmer-members. It had an annual revenue of $19.9 billion in 2011. In planning out future expansion in China, it must contend with the dividend shares owned by its farmer-members. The company has created a "Trading Among Farmer" plan to allow for the sale of these shares on the New Zealand stock exchange. Under a proposed arrangement, the original farmer-members could sell shares but would retain their voting rights. It is uncertain whether a majority of farmer-members would approve this measure.  On 23 April 2012, Fonterra announced that it hold a special farmer-members meeting on 25 June 2012 to discuss details of the plan and put the matter to a final vote of approval.

About Margaret

CEO and Curator (The Food Museum) | Managing Director and Chief Editor (GR2 Global LLC) | Educator (UCLA PhD) | Researching and writing on global food issues, nutrition and health, sustainability, history (preservation), conservation (natural resources), and design.
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