Wednesday, 03 December 2014 00:00

Waitaki Valley the new ‘Milk Valley’

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WE’VE ALL heard of Silicon Valley in California. Now China’s biggest dairy company appears to have similarly named the Waitaki Valley.

 Opening its Oceania factory at Glenavy in the far south of Canterbury, last week, Yili said it was the “Opening Ceremony of Future-Milk Valley”.

After a Maori welcome as the day’s line-up of dignitaries filed in, suppliers, staff and a melee of reporters from New Zealand and China heard how Yili is a household name in China and the only Asian dairy company in the world’s top ten, with sales in 2013 of US$7.67bn.

Founded in 1956, over the past decade it has grown 22.4% a year as it pursues its mission “to be recognised as the world class health foods group”.

Yili has five business units – liquid milk, icecream, infant formula, yoghurt and raw milk [powder] – and at least 10 million brands, visitors were told. Those brands include market leaders in China in icecream, children’s milk and organics, though yoghurt is its fastest growing category.

“One in six kids drinks Yili products in China,” the day’s Chinese speaking compere said through an interpreter.

The firm is the official sponsor of China’s Olympics team and has a branding deal with Disney. 

In 2012 it started extending outside China, planning its factory at Glenavy; in 2013 it signed a partnership with DFL in the US, and with an Italian dairy company; now its Glenavy factory is commissioned and a $400m expansion plan’s been announced (see panel above).

“So it is the only dairy company in China that reaches three continents,” visitors heard.

In Chinese, the word Yili means “for the benefit of everyone”, visitors were told, and Yili’s president Pan Gang stressed the contribution of the Glenavy factory to the local economy and New Zealand’s tax take.

“My colleagues and I call it the milk valley of the future,” he said through an interpreter. “Yili Oceania is a great sign and leading symbol of the cooperation between New Zealand and China.”

Todd McLay, New Zealand’s Associate Minister of Trade and Foreign Affairs, picked up the bilateral Kiwi-Chinese cooperation theme, saying the previous week’s visit by China’s president Xi Jinping “marked an auspicious time in China and New Zealand’s relations.”

This year $11bn of goods will be exported to China and two-way trade already exceeds the $20b goal mutually agreed in 2010.

McLay stressed two-way investment is the “key” in the relationship, rattling off examples of Chinese investment in New Zealand which now accounts for at least half the total overseas investment in New Zealand.

Meanwhile New Zealand Government and business investment in China has increased by “over 10% in the past year,” he said, citing Fonterra’s $615m Beingmate joint venture and continued investment in farms in China.

Zhang Fan of China’s embassy in Wellington said the Yili opening “signals the strong commitment of Chinese companies to make significant investments in New Zealand and mirrors the strong enthusiasm of a lot of Chinese companies to make inroads into New Zealand”.

Speaking on behalf of the farmers supplying Yili, Wilma van Leeuwen said Yili’s development was the result of long and ultimately successful negotiations, and stressed the need for “both parties to be justly rewarded”. “We see this as a long standing partnership. To be successful both parties want to be looked after.”

Race for milk hots up in Canterbury

THE RACE for milk is further hotting up.

Last month came Fonterra’s news of two big dryers at Studholme.  And now Yili confirms $400m more plant at its Oceania Dairy 20km from Glenavy.

 “We anticipate the first phase of the expansion project will commence in early 2015 and [finish]… in 2019,” says Oceania chief executive Aidan Johnstone.

Oceania expects to be handling at least 630m L of milk from local farms by 2015, “generating export revenues in excess of $700m”.

This year Oceania will collect about 165m L from 48 suppliers using 70% of the plant’s capacity in its first year. 

Johnstone told Rural News they expect “close to 60” suppliers for next year, giving a 25% increase in supply. “We have a list of interested farmers but we will always take more expressions of interest.”

If anything, a lower payout would push more milk to Oceania, rather than Fonterra, as there would be less capital available for cooperative shares, he suggests.

On Fonterra’s plans, Johnstone says Oceania will likely get in ahead: its second whole milk powder dryer, an infant formula canning line and UHT liquid milk and lactoferrin facilities would “probably precede” any expansion of Studholme.

“But there’s plenty of milk in the region for us all,” he said.

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