Fonterra pushes plans for own-brand milk in China

Fonterra, the world's largest dairy processor, is moving ahead with plans to launch its own branded milk formula in China, undeterred by a recent botulism scare and Beijing's crackdown on foreign firms over alleged corrupt sales practices.

China is a magnet for foreign milk formula makers, with its US$12.4 billion market expected to double by 2017. Foreign firms are under scrutiny, however, after reports alleged some had bribed medical staff to recommend their products to new mothers.

The authorities have fined a group of mostly foreign milk formula producers US$110 million for price fixing.

New Zealand's Fonterra Co-operative, owned by 10,500 farmers, supplies 90 per cent of China's milk powder imports by selling its raw material to other companies to make products ranging from infant formula to cheese on frozen pizzas.

While China is its biggest export market, Fonterra has stayed away from selling its own branded baby formula there since a poisoning incident in 2008, when six infants died and thousands fell ill after Chinese dairy firm Sanlu was found to have added melamine to bulk up its infant products.

Sanlu collapsed as a result of the scandal, while Fonterra, which held a stake in the Chinese company, was criticised for failing to blow the whistle sooner and more loudly.

Fonterra yesterday reported an 18 per cent rise in its full-year profit, despite a drought trimming earnings. Net profit for the year to July was NZ$736 million (HK$4.73 billion).