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Fonterra to Double China Milk Output After Contamination Scare

Sept. 11 (Bloomberg) -- Fonterra Cooperative Group Ltd. said it plans to double milk production capacity in China as dairy demand outstrips supply and as the exporter seeks to regain consumer confidence after a recent contamination scare.

The Auckland, New Zealand-based dairy cooperative will build a second farm hub in the Asian nation, a move which will double its production levels there to 300 million litres a year, it said in a statement yesterday. The farm starts operation in the second half of 2014.

Fonterra plans to raise milk production in China to a billion litres by 2020 as rising incomes drive consumers to buy more milk and yogurt. The dairy producer said last month a dirty pipe at a processing plant may have contaminated a whey protein used in baby formula with a botulism-causing bacteria.

While the New Zealand government’s testing subsequently found the contamination didn’t pose a food safety risk, the announcement led to import bans from some tainted New Zealand dairy products as well as product recalls in China by companies, such as Coca-Cola Co. and Danone.

“Raw milk supply growth in China has been around two percent over the past three years but demand is growing at around six to eight percent,” Kelvin Wickham, Fonterra President in Greater China and India, said in the statement. “There are significant opportunities for Fonterra to help bridge this supply gap.”

The new farm hub, located in China’s northern Shanxi province, will have five farms with 3,000 cows each, the dairy producer said. Fonterra’s first farm hub in the northern Hebei province will have the capacity to produce 150 million litres of milk when fully operational at the end of the year, said Maree Wilson, Fonterra’s Shanghai-based spokeswoman.

The dairy cooperative was earlier this year also fined 4.5 million yuan ($735,000) by China’s market watchdog for violating anti-monopoly laws. China, New Zealand’s biggest dairy customer, bought NZ$3 billion ($2.4 billion) worth of dairy products in the year through June.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at

To contact the editor responsible for this story: Stephanie Wong at

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