Dairy Products China News

Happy New Year to all readers! No surprise that food safety continues to grab the headlines in China as 2014 gets underway. This time it’s the meat sector in the spotlight – first Wal-Mart finding that one of its local suppliers of donkey meat snacks had added fox meat into the product, then a scandal in Guangdong with arrests of people suspected of injecting dirty pond water into lamb (6kg per sheep apparently!) to increase its weight and raise its price. Not that the dairy industry can afford any Schadenfreude… but this underlines once again why so many Chinese consumers are suspicious of local food products.

It also highlights the importance of further internationalisation. Yet the Chinese dairy industry has plenty of competition for dairy sector investment opportunities. This is nicely exemplified by the ongoing competition to buy Australia’s Warrnambool Cheese and Butter – where the current bid price factors in a huge jump in potential earnings which seems hard to believe. The lead shareholders Bega (now out of the race), Murray Goulburn and Saputo encountered talk of a $10 share bid by a Chinese group before Xmas, trumping Murray Goulburn’s $9.50 offer. Was this driven by a hedge fund or is a Chinese owner a possibility? Murray Goulburn has really pushed the Australia-owned, farmer-owned theme. Moreover WCB is a cheese company first and powder second – is that a mix that any of the China groups would really want to pay top dollar for? Meanwhile today we have reports that Chinese interests are close to acquiring another Australian business: United Dairy Power. Such turmoil has been one of the factors causing the delay of the Dairy Australia Investment Summit which had been scheduled for next month – you’d expect that a wide range of Chinese dairy industry executives will have to rearrange their travel plans to Melbourne!