Chinese dairy firm eyes NZ future

By Alexander Speirs

Yashili NZ's Yingxiang Zhao. Photo / Supplied
Yashili NZ's Yingxiang Zhao. Photo / Supplied

Yashili's New Zealand boss has signalled the $212 million processing plant the Chinese dairy company will build in Pokeno is just the first step in developing its Kiwi footprint.

"Internally we call this a stage one project. There is absolutely a chance for further growth and continued investment in New Zealand," says Yingxiang Zhao who is general manager of Yashili New Zealand dairy.

That $212 million deal - which gained Overseas Investment Commission approval 10 days ago - will be the first Chinese milk processing plant to be set up in New Zealand.

"Everybody knows New Zealand has an image for quality, which is especially strong in the dairy industry," says Zhao.

Yashili already sources milk powder from New Zealand, which it uses to market its own product with slogans such as "Genuine New Zealand, Love from Yashili" and "100% imported from New Zealand's milk source". It first imported New Zealand milk products to China more than 10 years ago.

Zhao says the premium end of Yashili's product line has been based on New Zealand ingredients since 2010 and it strongly pushes the image of our dairy industry in the Chinese market.

"After we have set up plants in New Zealand we can say that we have our base of operations for milk powder in New Zealand and we feel this will translate well to the market."

With strong consumer demand in China, the Pokeno plant was deemed necessary to supply an ever-increasing market for their top-end products. Says Zhao, "Yashili's market growth rate is in double digits every year."

Zhao has a technical background as a food science major. A 25-year industry veteran, he worked on China's first infant formula plant for Nestle in the 1990s. Zhao joined Yashili in 2006 and was charged with establishing a plant, then running and managing the facility.

In 2012, Zhao moved with his wife and young daughter to Auckland to develop the Pokeno plant and run operations. He plans to call New Zealand home long-term.

Preliminary discussions have been held with potential partners and suppliers. "At this stage we do not plan to source milk directly from farmers, we plan to use Fonterra or other existing companies who have all of those networks in place."

Yashili hopes to export 52,000 tonnes of milk powder annually to China by 2014. Half of this will be finished products ready to be consumed and the other half will require further processing and packaging within China before being distributed to local markets.

The plant will predominantly be run by local employees - 100 new jobs are expected. Yashili will bring in up to five Chinese staff who will be specialists in product formulation and import/export regulations.

"The company has three years to build the plant before its consent lapses, which will also impose certain ongoing reporting responsibilities on Yashili New Zealand," chairman Zhang Lidian said in a statement to the Hong Kong Stock Exchange.

Yashili New Zealand is still waiting for land use and resources consents and is holding a tender for the dryer component of the facility, he said.

Yashili flagged the New Zealand investment in January after the Chaozhou City, Guangdong-based company's board signed off on a project to set up a local manufacturing facility to process up to 52,000 tons of finished and semi-finished products, including base milk powder, by the second half of next year.

Yashili was set up by the Zhang family in 1983; they still retain control. US private equity firm Carlyle Group bought a stake in the company in 2009 to ramp up its research and production, and raised HK$2.7 billion when it floated a minority share in Hong Kong the following year.

Chairman Zhang Lidian is on the Chinese committee of the International Dairy Federation, and is a representative for Guangdong in the National People's Congress.

China's dairy footprint

Shanghai Bright Dairy
Owns 51 per cent of Synlait Milk and markets the Canterbury Pure brand of infant formula in China and elsewhere in Asia.

Shanghai Pengxin
Paid $210 million for the 16 Crafar farms and has been in talks with Miraka on an off-take agreement to produce UHT for the Chinese market.

Will build a $212 million milk processing plant at Pokeno. This will be the first fully-fledged standalone Chinese dairy investment in NZ.

China's largest dairy company will spend $214 million building an infant formula plant in South Canterbury in a deal that will see it take over Oceania Dairy Group.

- Additional reporting: Businessdesk

- NZ Herald

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