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Australian firm to cash in on China’s ‘booming’ infant formula market

By Ankush Chibber , 05-Jul-2012

Australian firm hopes to cash in on Chinese infant formula potential
Australian firm hopes to cash in on Chinese infant formula potential

Australia’s GMP Pharmaceuticals hopes to tap into the infant formula potential in China with its pharmaceutical-grade production facility in New Zealand.

The NZ$8m facility was officially inaugurated last week, but it has been in operation for the last seven months on a pilot basis.

Minesh Patel, general manager for GMP New Zealand, told FoodNavigator-Asia that the majority of business is anticipated to come from China.

“The Chinese demand for New Zealand dairy products is booming,” Patel said.

“The Chinese consider Kiwi dairy products to be of the highest quality and they are willing to stretch their budgets for products made here,” he added.  

However, business will also come from Vietnam and Korea as well as Hong Kong and Singapore to a lesser extent, he noted.

Surging search for safe dairy

The Chinese population is now disenchanted and wary of their own dairy producers, he said, following a spate of milk and infant formula contamination scandals.

“New Zealand dairy sector holds a reputation of safety,” he said, which spells clear business opportunities.

Social factors in China are also helping boost demand along with “a rising middle class with increased purchasing power and China’s one child policy that lets parents put more into their only child’s welfare”.

Current business with China solid

GMP’s existing business in supplements sees around 15-20% of revenues coming from China, Patel detailed.

However, with infant formula, it is anticipated China will dominate revenues to the tune of at least 80%.

The company already has an office in Beijing and a staff of 80 working directly with clients there, he revealed.

On the question of resistance from within China to the growing popularity of Kiwi dairy products, Patel said that while there is some opposition from local dairy bodies, the regulatory environment is friendly.

“With the China-New Zealand Free Trade Agreement, our costs to ship products to China have also been reduced. There are no tariffs,” he said.

Production operations

The new facility has been operating at a capacity of 10m cans per year but Patel said by the end of 2012 the expectation is to produce over 20m cans of infant formula.

“The facility is able to make infant formula in cans or sachet packaging for Chinese dairy brands, to whom GMP provides its services to,” he said.

GMP is already working with Yumi Yumi and Goldmax in China, he added.

Eventually, the company plans to manufacture other value-added dairy products, like yoghurt and pregnancy formula, he said.

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