China set to be Fonterra's No 1 client

  • 25/11/2015
China set to be Fonterra's No 1 client

By Fiona Rotherham

Fonterra has set a target of becoming the number one dairy player in China and doubling its business in the country to $10 billion within the next five years.

Speaking at the co-operative's annual meeting in Waitoa today, chief executive Theo Spierings said the new plan meant China could become 25 percent to 30 percent of total revenue.

When asked whether that would expose the cooperative to too much risk in one country, Spierings said China's provinces could almost be regarded as countries in their own right.

"Local governments are getting much stronger," he said. But the company was also driving growth throughout southeast Asia and into Latin America, he said.

China and Russia are the two biggest dairy markets in the world and had both reduced demand for different reasons in the past 12 months, but chairman John Wilson said Fonterra had shown it had the strength to sell into other global markets as well.

Spierings said the next business plan would consider the right timing to resume production in China, which would be considered by the management team in March/April and the plan put before the board in June.

He said Fonterra didn't want to build "assets for assets' sake" and there had been considerable interest from potential partners, many of whom were customers, in working with the cooperative on its manufacturing needs in China.

Fonterra's managing director of international farming, Alan van der Nagel, said last week that it would take another two years to become profitable after it posted a loss of $44 million in the 2015 financial year.

The company is proceeding with a US$300 million, 51/49 joint venture with Abbott Laboratories to build a third farming hub, which van der Nagel said would mean the group had the capacity to produce 600 million litres a year of milk from its three China hubs.