Diary Producer Continues Expansion into China

In yesterday’s Wall Street Journal, there was an interview with Andrew Ferrier, the Chief Executive of Fonterra Co-Operative Group of New Zealand.  This company is the third largest dairy exporter in the world with sales of about $13 billion, profits of $500 million and almost 16,000 employees.  It is interesting that a small country like New Zealand is able to have a dairy company that is the third largest dairy exporter and will probably get larger.

Some of the interesting comments from the interview are as follows:

• Even though the company was hurt by the contaminated milk scandal of 2008, it is pushing ahead to develop many more dairy farms in China.  They have one farm already, are developing a second and have a third in the works.  They also have several joint ventures with other multiple farms.  One of the key issues in having a diary in China is that feed must be brought to the farm.
• The steady rise in global consumption will continue as developing nations get wealthier, there is a bigger middle class looking for healthier foods.  Many of these are looking to switch from carbohydrate-based diets to a protein-based diet, fueling the need for protein and dairy.

I think we will continue to see other companies attempt to expand their food production capabilities in China and India.  We will see how it goes.