Business / Companies

Pengxin moves to expand holdings of NZ dairy with Synlait buyout

By Wang Ying (China Daily) Updated: 2014-03-07 08:17

China imported 1.52 million metric tons of dairy products from January to November 2013, up 35.7 percent, according to the General Administration of Customs. New Zealand was responsible for the lion's share of those imports at 86 percent.

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Meng Jie, an analyst at China Dragon Securities Co Ltd, said Pengxin's deal may be inspired by talk that China will soon announce new incentives for the dairy industry. Companies in the sector are preparing for that development through acquisitions or expansion, added Meng.

Shanghai Bright Holstan Co Ltd, a subsidiary of Bright Dairy & Food Co Ltd, has decided to invest about 450 million yuan to build a demonstration dairy farm in Anyang, Henan.

Bright Dairy & Food Co Ltd will invest 248 million yuan in a new demonstration dairy farm in Heilongjiang province.

Inner Mongolia Yili Industrial Group Co Ltd will invest $50 million in Hong Kong-based dairy firm China Huishan Dairy Holdings Co as part of its drive to secure milk supplies.

But Meng expressed concern about the outlook for Shanghai Pengxin, given its substantial holdings in New Zealand.

She noted that New Zealand's Fonterra Co-operative Group Ltd, the world's largest dairy exporter, had to recall milk powder last year for safety reasons.

"As a mother, I now prefer domestic milk powder to imported brands. And for a dairy producer with low recognition of its brand among Chinese consumers, it is too risky to pour so much money into New Zealand dairy farms," said Meng.

Song suggested it would be better for Pengxin to set up joint ventures instead of taking control of dairy farms.

Wang Zhuoqiong contributed to this story.