It's been a tough few years for Beingmate Baby and Child but Fonterra - which has an 18.8 per cent stake - is cautiously optimistic the Chinese infant formula company has turned the corner.
Fonterra picked up the holding in 2015 for 18 yuan a share, but two successive years of big losses have seen the share price slide, the stock last trading on Friday at just 5.13 yuan.
The co-op earlier this year wrote down the value of the stake by $405 million, against its initial purchase price of $755m.
The writedown was a factor in Fonterra reporting its first ever loss $196m - for the July year.
What Fonterra does with Beingmate, and its portfolio of other investments and joint ventures, is up for review.
While the past two years have been dismal, the company has forecast a 28m renminbi (RMB) ($5.9m) to 78m RMB ($16.4m) net profit for 2018.
"That's a big change from where we were last year and a year before that," Chris Greenough, Fonterra's strategic portfolio management, said.
"We are starting to see some green shoots."
On the regulatory front, Beingmate remained well-placed under China's "article 81" rule, which stipulates infant formula makers must meet stringent requirement before their product can gain registration.
Beingmate's 51 brands - that's most of them - are registered. When article 81 was being phased in, the first nine registrations went to Beingmate.
Greenough said Beingmate's manufacturing capacity was still world class "and there is a great deal of potential growth options within their existing capacity".
Beingmate appointed former Royal FrieslandCampina and Wyeth Nutrition executive Bao Xiufei (Bob) as general manager in July.
"With Bob on board, and by being able to make the necessary adjustments to their distribution strategy, there is hope for Beingmate to have a successful turnaround in the short to medium term," Greenough said, adding "but not in the immediate term."
"We have cautious optimism about Beingmate's fortunes as we go ahead."
Beingmate's problems began when there was a sudden shift in consumer behaviour to online sales of infant formula in China.
At the same time there was the rapid expansion of the daigou trade channel - which essentially amounts to parallel importing.
These two elements took the Chinese infant formula market by surprise, and international formula companies were the main beneficiaries.
As luck, or bad luck, would have it, Beingmate's share price steadily sank once Fonterra was on board, raising questions about whether the co-op conducted proper due diligence.
"We have had a number of reviews as to whether due diligence was up to scratch, both from management and independently as well, and the due diligence was up to scratch," Greenough said. "To say that there was not strong due diligence would be false."
As Greenough sees it, previous management did not understand the distribution issues as well it should have, but it was never a quality issue with Beingmate.
"Fortunately those issues are easier to fix than underlying product issues," he said.
News that a subsidiary of China's Great Wall had taken a 5.09 per cent net stake and would enter into a strategic co-operation agreement with Beingmate to assist in the turnaround was a good "very good sign".
"These guys are big hitters in China, so we are pleased to see that development."
The Chinese government's message to Fonterra is that its early years was for the co-op to get some skin in the game.
This it has done by setting up a substantial dairy farming operation, forming local joint ventures, and partnering up with Beingmate.
Greenough said Beingmate had been disappointing.
"Having said that, the level of New Zealand milksolids moving to China since we went into this partnership has increased many, many, many fold," he said.
"If you go back five years China was not a massive market for us. Now it is a quarter of our business."
"I dare say that we would not have been able to grow to that level without having those building blocks in place," he said.
The dairy sector in Australasia is going through change. Singapore's Wilmar International could gain full control of Goodman Fielder, while Japan's Kirin Holdings is reviewing options including a possible sale of its substantial Australian dairy business.
Greenough said Fonterra would not cut itself off from opportunities that may arise from changes in the sector.
"But we will be a lot more circumspect in terms of what we invest in, and what we don't invest in."