Yashili’s spokesman was unable to confirm the planned site for the company’s intended $210 million processing investment. A release by the company to the Hong Kong Stock Exchange indicated it intends to start processing in the second half of next year. Given resource management requirements and time constraints, a pre-consented site would be required.
Waikato Regional Council consents manager Barry Campbell confirmed it has two sites consented for dairy factory use. Both are in the South Waikato, with one near Arapuni and the other on the southern edge of Tokoroa. The Arapuni site was intended to be used by Arapuni Milk. Arapuni Milk director Jon Courtney said the Chinese bid did not involve his company.
The other site is owned by Dairyland Products, headed up by Auckland businessman-investor Keith Jackson. When consent was granted on this site back in 2011 he said any further development was dependent on sourcing funds to progress to the next stage.
This site is also close to the 29 dairy properties either sold or on the market by Carter Holt Harvey (CHH). At present only five properties remain to sell, with eight recently purchased through a Swedish superannuation fund and gaining Overseas Investment Office (OIO) approval in late November. Proximity to a factory site and a concentration of larger-scale farms would make a processing cluster viable, while a factory has approval from nearby large-scale farmer to receive waste water irrigation from the plant.
However Jackson said he was not linked to any proposed Chinese operation.
The Guangdong-based company has set up a NZ company for the operation,Yashili New Zealand Dairy Company, and a conditional agreement has been entered into to buy the land, which being greater than 6ha is subject to OIO approval.
The 30-year-old company specialises in the production of baby formula and launched the Scient brand in 2002. Latest results for 2011 posted with the Hong Kong stock exchange indicate a company in good health, experiencing a $60m profit off a turnover of $600m, with a dividend payment made that accounted for 65% of the company’s profit.
The report does however note the significant surge in raw manufacturing costs and the company has cited NZ’s relatively cheap milk supply as a reason for establishing here.
The products are sold through a China-wide network of 1600 distributors, putting the product into 95,000 retail outlets. In 2011 the Yashili brand was valued at RMB7.77b ($1.55b), ranking 163 out of the top 500 brands. The annual report quotes group chair Zhang Lidian’s desire to increase its focus on product safety and quality and intensify product development.
Dairy industry analyst Peter Fraser said the Chinese companies were recognising the value of taking processing to “stage two”, beyond simply collecting and drying down bulk milk powder. It involved branding and adding value to that product, something commentators had been urging the industry here to do on a larger scale for several years.
He said China did not have a large number of branded infant formula products in a relatively young market, and over time anything branded and not sourced from China itself offered significant value-add opportunities and food safety security. The proposition of more Chinese companies coming into NZ to process milk raised real tensions around Fonterra’s business.
Yashili, for example, currently sources most of its milk powder from NZ and once fully operating is claiming to process 50,000 tonnes/year into product, through a single dryer, requiring upwards of 60,000 cows to meet that demand.
Any loss of milk supply comes as another South Waikato independent processor, Miraka, ramps up its production, processing 35,000t of product this season.
Shanghai Pengxin, buyer of the Crafar farms business, has also made no secret about its desire to process milk in the area.