'Full steam ahead' for Fonterra's own-brand China plan after recall

Wed Sep 25, 2013 3:08am EDT
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By Naomi Tajitsu

WELLINGTON (Reuters) - Fonterra (FSF.NZ: Quote), 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.

CEO Theo Spierings told Reuters on Wednesday he expected the company's Anmum brand of infant milk formula to be available in 70 cities in the world's second-largest economy in 2-3 years as part of a plan to enter the country's lucrative formula market.

"We reviewed our plans after the (botulism) crisis. We reviewed whether we should delay it, and we said 'No', so it's full steam ahead," Spierings said, adding he was stepping up Fonterra's China expansion, prioritizing growth in its consumer brands and food services there over other regions.

"In China ... we're going faster. In other geographies, in India, we've put some plans on hold. In Africa, we are only stepping up things in a limited way," he said.

China is a magnet for foreign milk formula makers, with its $12.4 billion market expected to double by 2017. Foreign firms are under scrutiny, however, after reports alleged companies bribed medical staff to recommend their products to new mothers. Authorities have also fined a group of mostly foreign milk formula producers $110 million for price fixing.

Fonterra recently launched Anmum infant formula in China's Guangzhou province on a pilot basis on the company's website, he said, adding it would be available in Hong Kong later this year.

But Spierings said the roll-out for Beijing and Shanghai would be delayed as Fonterra had yet to develop a retail presence in the capital, and still had to assess whether it could take on fierce competition in Shanghai.

In pushing its own brand in China, New Zealand's Fonterra Co-operative Group FCGHA.NZ will be up against rivals such as Danone (DANO.PA: Quote) - a major customer whose brands command 9.2 percent of the Chinese market - and Mead Johnson MJN.N.   Continued...

The Fonterra logo is seen near the Fonterra Te Rapa plant near Hamilton August 6, 2013. REUTERS/Nigel Marple