China’s Wahaha eyes dairy investment in Australia

Hangzhou Wahaha Group, a major Chinese beverage maker, has announced plans to invest about A$220m ($235m) in dairy farms in Australia to expand and secure milk supply for its operations.

With the help from the Western Australia Government, the company will carry out a survey of local dairy farms and will take a concrete step only after receiving the results in June.

Wahaha also plans to establish powdered milk factories, from where it intends to source major ingredients for its beverages to be sold in China.

On the sidelines of the National People’s Congress, China’s annual lawmaking session, Hangzhou Wahaha Group chairman Zong Qinghou said that the company consumes 50,000t of milk powder a year, half of which is imported.

"Our investment in Australia’s dairy farms and related industry chains will guarantee stable supplies of quality milk powder," Qinghou added.

Qinghou however added that the company is cautious about investing overseas and will only put more capital in when it has sufficiently tested the waters.

One of the luring factors for Wahaha in seeking to invest in Australia is the availability of high-quality milk at lower prices, as the average cost of milk is 20 Australian cents per litre compared to CNY3 (45 Australian cents) in China.

The group is also planning to diversify its business beyond beverages, possibly into agriculture, as profit margins have grown low.

In 2011, Wahaha reported operating revenues of about $10.6bn and expects a jump to $13.4bn in 2012, with earnings to grow 40%, driven by new product launches and entry into new markets.