Agribusiness Report: NZ firms working with China's biggest players

PwC's corporate finance partner Craig Armitage.

Fonterra chief executive Theo Spierings expects to unveil the first of the co-operative's major Chinese partnerships later this year.

Spierings, currently in Europe visiting major counter-parties, is confident of securing a partnership with at least one of the major Chinese dairy players. "You won't be surprised at who it is," Spierings said before leaving for Europe.

Fonterra's China play took a back seat after the botulism scare which turned out to be the result of a false positive test. Chinese industry players held back until the results of the various reviews were published. But confidence in Fonterra is now said to be restored.

Industry expectations are one of China's largest food companies, the Cofco Group, will be involved either directly or through Chinese dairy company Mengniu in which is it is the largest shareholder. Fonterra is not the only New Zealand player forging major relationships in the Chinese dairy industry.

State-owned Enterprise AsureQuality and PwC New Zealand last year signed a co-operation framework agreement with Mengniu, and COFCO to enhance agricultural practices in China using the the NZ agriculture model and international industry good practice.

A combined AsureQuality and PwC team has been investigating the current situation of Chinese farm dairy operations and comparing these with industry good practice.

"This has provided AsureQuality and PwC New Zealand with the opportunity to observe Chinese farm dairy operations first hand, gain access to local support and build local relationships," says PwC's corporate finance partner Craig Armitage. "This has benefited all parties."

The team has visited different types of supply entities and studied the current trends of dairy farm operations including the development of more integrated farming operations.

Armitage says they have also met Chinese Government authorities to understand the local policies, plans and demand, as well as to share proposed plans for a subsequent cooperation agreement. "Chinese authorities expressed consistent interest in supporting the co-operation between New Zealand and China," adds Armitage.

AsureQuality and PwC have also assisted Mengniu through participation in a workshop that hosted a Ministry for Primary Industries delegation, together with representatives of NZ agricultural companies, to discuss commercial opportunities and form relationships.

Discussions with Mengniu are continuing with an aim of helping Chinese dairy farms improve their operations.

Armitage believes this may lead to future commercial opportunities for New Zealand's agricultural entities.

He says assurance and certification services for good on-farm practices remains of high interest to the Chinese dairy sector and is viewed as an essential part of ensuring compliance with good farm practice that can be communicated, so as to build consumer confidence in food safety and quality.

Laboratory testing is also an essential part of good food safety and quality assurance practices and as such the Chinese Government is encouraging more third party commercial laboratory services. The market for such services is estimated to be significant.

AsureQuality is currently assessing options to provide certification and / or laboratory services for the China market. As the largest shareholder of Mengniu, Cofco continues to express interest in supporting the co-operation with Mengniu, and other Cofco Group Companies.