Australia-based dairy to cereal business Freedom Foods Group said today (4 July) “binding documentation” had been signed with its Chinese partner Shenzhen Jialile Food Co. over their plans to set up a new company, Australia’s Own Dairy Company China.
The announcement follows a “memorandum of understanding” drawn up between the two companies last year and unveiled in October.
The creation of Australia’s Own China, to be known as AO China, is a bid to further boost the presence of Freedom Foods Group’s children’s milk brand Australia’s Own in the country.
The two companies launched Australia’s Own in China in February last year in Hunan, Zhejiang and Jiangsu in the south and east of the country and since its launch it has grown to become the biggest imported children’s milk brand in China.
The brand has been supported by “significant ongoing marketing” including point of sale promotions, sampling and sponsorship of leading children’s TV programmes, and is produced from Freedom Foods’ Australian Taren Point facility which is limited by capacity to production of around 35 million packs per year. However, production will soon be moving to a new site at nearby Ingleburn where it is estimated that volumes will nearly double, to around 60 million cartons in 2018. Production is expected to start at the new site once Australian and Chinese regulatory approval has been obtained for export sales from the site.
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AO China will run Shenzhen Jialile Food company’s operations in the country and “provide a stronger strategic link” between brand operations in China , which include sales, marketing and distribution, and in Australia, sourcing, processing and manufacturing.
Freedom Foods will pay CNY22m for an initial 10% investment in AO China and will be represented on its board, with an option to increase its shareholding up to 30% within three years.
The companies also plan to potentially seek a listing on an international stock exchange in the medium term.
