Chinese firm plans to build milk plant

China's Yashili New Zealand Dairy Co has entered into a conditional agreement to buy industrial land for a proposed infant milk formula plant at Pokeno in Waikato.

The company is waiting for Overseas Investment Office (OIO) approval to proceed with the $210 million project that includes purchase of industrial land and construction and working capital for a processing plant on a newly-created industrial park at the northern end of the Waikato expressway, Guangdong-based Yashili said in a statement.

Upon completion, the plant will produce up to 52,000 tonnes of finished and semi-finished milk product annually.

In January Yashili and China's biggest dairy company, Yili, unveiled plans to invest in building processing plants in New Zealand. Yili will spend $214 million in establishing an infant formula plant in South Canterbury as a result of its planned takeover of Oceania Dairy group.

Yashili said its New Zealand plant was planned for commissioning in the second half of 2014.

Yashili is one of China's biggest producers, distributors and marketers of infant milk formula for its domestic market. Its products are sold under the Yashili, Scient and Merla brands in just over 105,000 retail outlets in China.

The company has imported milk powder from New Zealand for over 10 years and has used New Zealand milk powder exclusively in its infant milk formula since August 2010.

In the Chinese market, Yashili has promoted the high quality of New Zealand-sourced milk content in its premium brands and associated its products, the company's New Zealand operations manager Terry Norwood said.

"We therefore see that it is a logical step for Yashili to further position its premium brands alongside New Zealand's strong, positive environmental profile, its reputation for technical excellence, and its efficient management systems by investing in a manufacturing operation to this country," he said.

Norwood said the company's move had been encouraged by the Chinese Government's decision to substantially reduce import tariffs on finished milk formula.

"This decision, in turn, has been in response to the country's rapidly growing demand for infant milk formula, driven by a large rural-urban shift, a stable birth rate, more mothers going out to work, and increases in disposable incomes.

Yashili New Zealand Dairy Company will be providing local employment for 100 people, he said.

Norwood said that Yashili's interest in New Zealand will be wholly concentrated on manufacturing.

"As a newcomer to the New Zealand dairy processing sector we want this project to be seen internationally as a working model for future successful investment in the country's dairying industry, where we add value to both local and imported ingredients for products for the export market," Norwood said.

He said further information would made available once the purchase was approved by the Overseas Investment Office.