Fonterra Cooperative Group owes holders in its Fonterra Shareholders Fund units a "more fulsome" update on Beingmate, the struggling Chinese infant formula producer and distributor that Fonterra uses to push its leading Anmum formula into the Chinese market, according to an analyst.

In a note to investors dated September 7, First New Zealand Capital's head of institutional research, Arie Dekker, identifies the lack of transparency about Fonterra's 18.8 percent shareholding in Beingmate as a confidence as well as a performance issue for investors.

"We view the investment as a material one from both a financial and confidence perspective. We think the time is right for FSF to provide a more fulsome disclosure on what has happened with Beingmate and the reasons why it remains confident in the long term future."

A Fonterra spokesman confirmed that there would be an update on Beingmate in the cooperative's September 25 earnings announcements.

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FNZC values the Fonterra stake in Beingmate at approximately $420 million, down around 45 per cent on its March 15 purchase price of around $756m, reflecting a range of problems at Beingmate, which included the firm declaring a $78m loss for the most recent half-year, having previously given guidance for a $10m profit for the period.

Beingmate shares, which are listed on the Shenzhen stock exchange, fell 10 per cent earlier this month after the result and immediately following their release from a trading halt triggered by the company negotiating to sell two assets to its controlling shareholder for around $40m.

In particular, FNZC wants details on Chinese market distribution of Anmum products, which Fonterra passed over entirely to Beingmate.

"Forecast annual sales growth was expected to exceed $100m per annum by 2018," wrote Dekker. "FSF has not reported directly on progress with Anmum in China but we understand sales growth has been positive off a low base and more specific visibility on what has been achieved for Anmum in China has not been provided to date."

Dekker's latest critique follows a wider analysis in July of Fonterra's global strategy, in which he questioned whether capital currently applied to gaining access to 'milk pools' in other countries, including China and Australia, was delivering returns superior to investing in higher value dairy products from its New Zealand production base.

"Beingmate has been struggling financially over the last few years and it is not inconceivable that this has had a negative impact on distribution of Anmum against expectations on the volumes" being produced at the jointly owned Darnum milk processing plant in Victoria, Australia.

"In short, Beingmate has lost sales, missed FSF targets and likely lost reasonable market share in the last three years and FSF has been largely silent on it with investors," FNZC says."

"We do view Beingmate as a reasonably material investment for FSF (including for sentiment) and there are reasonable questions on its value in FSF's books and how the market should look at the investment.

FNZC is maintaining a neutral rating on FSF units and a target price of $6.09. The units closed at $6.14 yesterday and have risen 9.6 per cent over the last year.

FNZC risks to that view are the pending outcome of the Danone litigation, relating to the 2013 whey protein concentrate contamination scare, which was one of the catalysts for the Beingmate play in 2014 after Danone stopped using Fonterra's Darnum facility. Beingmate picked up a 50 per cent interest in the Darnum plant in a joint venture with Fonterra.