MELBOURNE, Australia (Reuters) — Growing demand for powdered milk formula among China’s middle class and online direct distribution are driving major investments in processing capacity.
Murray Goulburn, Australia’s largest dairy producer, has announced plans to build a $280 million formula processing factory in partnership with Mead Johnson Nutrition of the United States and Kalbe Nutritionals of Indonesia.
The first stage of the plant in the state of Victoria will be operational in early 2019 and will initially produce 45,000 tonnes of powder formula per year, the company said in a statement.
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“In an already competitive Chinese market, this rise of a mobile middle class, plus e-commerce, gives disruptors new avenues to compete and win,” said chief executive officer Gary Helou.
Australia is seeking to dominate Asian markets for premium food as part of a rebalancing of the economy due to the fading mining investment boom.
China represents 18 percent of Australia’s dairy export volume. Asia as a whole accounts for 78 percent of the export market, valued at $2.86 billion last year, according to Dairy Australia.
E-commerce platforms, such as Alibaba, import two-thirds of the dairy products into China, according to Chinese market consultants the Silk Initiative.
“We are going more and more direct and it will keep going until it reaches an equilibrium,” Helou said.
“Will it be sustainable in the long term? We don’t know, but we welcome it.”
