The Chinese Government has approved a deal that will see New Zealand dairy giant Fonterra take a 43% stake in Chinese dairy group San Lu, the Chinese Premier Wen Jiabao announced today (6 April) during his visit to Wellington to meet with NZ officials.

San Lu has been a long standing customer of Fonterra and has an excellent record of growth, an established sales and distribution network reaching more than 600 Chinese cities and modern milk processing facilities, Fonterra CEO Andrew Ferrier said.

“Developing a closer working relationship with San Lu is the logical next step for Fonterra’s business in China,” he continued. “It complements our existing importing and consumer businesses there by partnering us with a successful local company that has access to local fresh milk supplies.”

Fonterra, along with many other Western companies, has identified China, with its recent economic growth, population strength and expanding middle class, as a growth market.

“Dairy consumption has increased considerably in recent years, but it is still well below the average for the Asian region. New Zealand has been a successful exporter of dairy ingredients to China for decades, but as local production increases to meet the rapidly growing local demand, becoming part of the local industry will give Fonterra further opportunities to employ our expertise in all areas of the business from milk collection to consumer good,” Ferrier said.
He also offered Fonterra’s support to the New Zealand Government’s attempts to negotiate a free-trade agreement with China, commenting that it would bring further benefits to the dairy industries in both countries.