Beingmate products in a supermarket in Central China's Henan Province on October 19, 2013 Photo: IC

 

New Zealand's Fonterra said Wednesday it will take a stake in Chinese baby food and formula maker Beingmate Baby and Child Food Co Ltd in the dairy giant's first tie-up with a Chinese processor since its involvement in a tainted infant formula scandal in 2008.

Fonterra Cooperative Group Ltd, the world's largest dairy exporter, said it would take a stake of up to 20 percent in Beingmate, and the two sides will set up a joint venture to purchase Fonterra's Darnum plant in Australia, according to a joint statement released on Wednesday.

The partnership will prioritize creating a fully integrated global supply chain from the farm gate direct to China's consumers, using Fonterra's milk pools and manufacturing sites in New Zealand, Australia and Europe, the statement said.

Its total investment in the partnership came to about $514 million, including proceeds from selling Beingmate a stake in an Australian plant, Fonterra said.

The cooperative also said it would invest about $463 million to boost dairy processing capacity in New Zealand.

Beingmate chairman Wang Zhentai said that the proposed partnership is a step forward in the company's vision to become a globally-recognized brand.

Theo Spierings, CEO of Fonterra, said Fonterra was moving on from a 2008 scandal when Sanlu, its then-partner in China, was found to have added a toxic industrial chemical called melamine to bulk up infant formulas.

Six children died and thousands fell ill due to the contamination.

"China is a completely different environment now, Beingmate is a completely different partner," he said.

Burned by the Sanlu disaster, the New Zealand dairy giant has been accused by some analysts of being slow to enter China's branded infant formula market, which research firm Euromonitor says could double to $31 billion by 2017.

Fonterra supplies wholesale infant milk formula to Chinese companies, which sell it under their own brands, but until recently it hadn't marketed its own Anmum infant formula to consumers in China. Under the deal, Fonterra will gain access to Beingmate's vast distribution channel for Anmum.

Spierings said Beingmate's role as China's biggest domestic supplier of milk formula and its clean track record made it an attractive partner.

Beingmate's brands, which include Love+ and Champion, own about 10 percent of the market.

ANZ rural economist Con Williams said Fonterra was cautious about China, after the company was criticized for failing to blow the whistle on Sanlu sooner.

China has been dogged by food safety issues with foreign firms coming under strong scrutiny.

A year ago Fonterra said it had found a potentially fatal bacteria in one of its products, triggering recalls of infant milk formula in markets including China. Tests later found the initial finding was incorrect.