New Zealand-based Synlait Milk has expanded its production capacity and scope in an attempt to make a major dent in to China's US$5bn infant formula market.
Synlait Milk gained access to the Chinese market after China-based Bright Dairy and Foods Co Ltd invested NZ$82m in the dairy food-processor in July this year, giving it a 51% controlling stake.
At that time, Bright laid out its intention that it would leverage Synlait's export driven strategy to offer high quality infant and whole milk powders for the growing Chinese market.
Michael Wan, marketing and communications manager at Synlait Milk, told Food Navigator-Asia.com that the company has developed an infant formula plant in its existing facility at Canterbury.
“We [already] produce a range of milk powder products and high-value functional ingredients for export. The development of our high-value nutritional ingredients business [infant formula] is where we see huge growth potential,” said Wan.
Wan pointed out that China is home to 60 million children under the age of 4, and is New Zealand's most important market.
“Each of those 60 million infants has six adults looking after it, their parents and both sets of grandparents, and there was an enormous concentration of income going into looking after those children and giving them the very best,” he said.
According to Wan, Chinese adults traditionally do not use a lot of milk in their diets but they are increasingly seeing the nutritional value in milk for young kids, and it's driving what they buy and how much they spend in the supermarket.
“Tins of top shelf infant milk formula were selling in China for NZ$100 each, while the product Synlait was about to launch with a partner would sell for about NZ$80. The milk is being bought by people who do not spend a lot on living expenses, yet are prepared to spend that on their children,” he said.
Wan conceded that there are external reasons to why China makes a lot more sense as an overseas market for the Kiwi dairy sector, including the NZ-China free trade agreement, which has lead to cost reductions and easier access.
But more importantly, Wan agrees, the many milk contamination scandals with home-grown dairies has prompted the Chinese consumer to look elsewhere including Kiwi dairies who are known for producing top quality products.
“The infant formula market in China is a US$5bn industry and we have high expectations of doing well in that market,” said Wan.
Synlait Milk, which started processing milk at its factory at Dunsandel in 2008, converts more than 300 million litres of milk a year into a variety of milk powder products and functional ingredients for export to functional food manufacturers.