Westland Milk considering China-based subsidiary

Last updated 05:00 21/02/2014

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The West Coast's dairy co-operative plans to increase its China export base with a possible subsidiary company and an increased number of employees to add to its Shanghai office.

Westland Milk Products has invested in the milk processing and infant formula powder sectors and exports about $130 million of product a year into China.

There is another $130m of product exported into other Asian countries, and Asia including China together made up about 40 per cent of Westland Milk's sales, chairman Matt O'Regan said.

The co-operative's board had discussed the idea of setting up a China subsidiary company to help establish a broader base and better contacts within that market.

Since Fonterra's powder contamination scare in 2013 there has been an increasing focus from countries like China on quality check processes on food imports.

Asked about a potentially tougher Chinese market O'Regan said "I wouldn't say it's got easier, but we are putting record volumes, as are most New Zealand companies now."

O'Regan said Westland Milk had always taken a serious line in providing "quality" products, working within best practice for the industry.

"We see that we're in a very good position with our quality and food safety record for supplying into China under the new regulations", he said.

"No you don't really have to do anything special, but some companies may be turned off if they don't have the facilities from the gate to the plate, we call it. You need the full [product management] process."

In the South Island Westland Milk has processing facilities in both Hokitika and at Rolleston.

The idea was still in the early stages, O'Regan said, but it should happen within the foreseeable future, most likely 12-18 months.

Potential sites included Beijing or even more likely Shanghai, where the co-operative already had an employee.

Extra staff would be added in China and the subsidiary would help forge relationships in the export market.

"Certainly we will be growing that number with an office . . . It's also a sign of a commitment to a country, something that the Chinese, everybody values actually, when someone commits reasonably seriously to something.

"That's where we come from, and I think it will help us with working through the regulations that may come into place."

Food regulations around the world continued to change, he added.

While Asia made up about 40 per cent of the company's sales, the other 60 per cent went to regions including New Zealand, Australia and the Middle East.

Westland Milk's turnover was $534m for the 2011/12 year, with the company commenting in November that it expected $750m in revenue for the co-operative in the 2013-14 season. 

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- BusinessDay

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