The sale of Fonterra’s two joint venture (JV) farms in China is expected to be completed today. The farms in Shandong province are being sold to Singapore-based AustAsia Investment Holdings for NZ$88 million (US$115.5 million) in total asset sale proceeds, which includes cash on completion. 

New Zealand heavyweight Fonterra currently owns the farms with an unnamed JV partner and has a 51 percent stake in the business.

It is selling overseas assets to reduce costs and focus on its core New Zealand milk business. 

However, the dairy giant stresses its commitment to the Chinese market despite disposing of the China JV farms. 

The sale of the JV farms is unconditional and requires no further regulatory approvals.

Growing business in China 
Fonterra CEO Miles Hurrell hails the sale as “an important milestone for the co-operative” and aligns to its strategy of prioritizing New Zealand milk.

“The sale of the JV farms allows us to focus even more on our farmer owners’ milk and follows the sale of our two wholly-owned China farming hubs earlier this year.

“Greater China continues to be one of our most important strategic markets. We remain committed to our China business, bringing the goodness of New Zealand milk to Chinese customers in innovative ways and partnering with local Chinese companies to do so. We are well placed to continue to grow our business in Greater China,” says Hurrell.

Previous farms disposals 
Earlier this year, Fonterra completed the sale of its two wholly-owned China farming hubs in Ying and Yutian to Inner Mongolia Youran Dairy Co, a subsidiary of China Youran Dairy Group Limited (Youran). That deal was subject to antitrust clearance and other regulatory approvals in China, which were received in April.

Hurrell said at the time that the sale of the farms would allow the Co-op to prioritize the areas of its business wher it has competitive advantages.

“For the last 18 months, we have been reviewing every part of the business to ensure our assets and investments meet the needs of the co-op today. Selling the farms is in line with our decision to focus on our New Zealand farmers’ milk,” he said.

“Selling the farms will allow us to focus even more on strengthening our Foodservice, Consumer Brands and Ingredients businesses in China.”

Eying Asia
Asia is a huge market both for F&B and dairy, partly because of its  large and growing population and also to the rising awareness about healthy diets. 

Industry has flagged hot investment opportunities and diverse market conditions there which make it attractive. 

Recently, our sister publication, NutritionInsight, looked into the growth in China’s infant nutrition industry, which is currently being driven by value and premiumization rather than volume, meaning that the country’s recent shift toward allowing couples to have up to three children is unlikely to have a significant impact on the infant nutrition sector.