Chinese dairy company Yili announced that it will invest CNY1.103 billion to build a new formula plant in New Zealand, which is expected to produce 47,000 tons of milk powder every year on its completion.
Yili reportedly has seven to eight milk powder manufacturing plants and packing plants in five milk powder manufacturing bases in China. These plants have annual production capacity of about 145,000 tons and their output is about 90,000 tons. With the completion of this new overseas plant, Yili's milk powder production capacity will increase by 30%.
Apart from the costs factors, Yili's new plant in New Zealand is also the result of the consideration of food safety. Rumor said that with the completion of the new plant, Yili may shut down its milk powder plants in China, except for the one in Hohhot. However, Yili said that is impossible and the main reason for establishing the plant in New Zealand is to use the local advantageous resources to produce infant formula.
A dairy industry expert told Chinese local media that in November and December 2012, the price of imported milk powder raw material from New Zealand was CNY29,000 to CNY30,000 each ton; while the price of Chinese-made milk powder raw material was CNY33,000 to CNY34,000 each ton. The new plant in New Zealand will help Yili save costs of CNY4,000 to CNY5,000 for each ton of raw material.
Prior to this, another Chinese dairy company Bright Dairy also entered the New Zealand market by acquiring a 51% stake in Synlait Milk Limited.