Tas­ma­nian milk

Who re­ally owns Aus­tralia’s largest dairy op­er­a­tion?

China Daily (USA) - - FRONT PAGE - By BLOOMBERG

China’s quest for high­erqual­ity food is tak­ing a big swing to the south. In fact, 5,300 miles (8,500 kilo­me­ters) down to Tas­ma­nia, the dairy hun­gry na­tion’s new­est source of fresh milk.

Busi­ness­man Lu Xian­feng plans to be­gin early next year fly­ing fresh milk to his home city of Ningbo, in eastern China, from the is­land state where he owns Aus­tralia’s largest dairy op­er­a­tion.

Lu’s Moon Lake In­vest­ments Pty bought the 191-yearold Van Diemen’s Land Co for A$280 mil­lion ($214 mil­lion) in March, giv­ing him ac­cess to 25 dairy farms and enough milk to fill an Olympic-size swim­ming pool ev­ery nine days.

A share of that will be flown to Ningbo ev­ery week, Sean Shwe, Moon Lake’s man­ag­ing di­rec­tor, said in Ho­bart, where the China-bound bulk de­liv­er­ies will de­part.

While coun­tries as far away as the Czech Repub­lic and Chile sell milk to China, Moon Lake is count­ing on gain­ing an edge with milk from Tas­ma­nia’s far north­west coast which boasts “the clean­est air in the world”.

The vol­ume of milk ship­ments to the world’s most­pop­u­lous na­tion has jumped an av­er­age of 126 per­cent a year since 2010, cre­at­ing a $333 mil­lion mar­ket dom­i­nated by the Euro­pean Union, ac­cord­ing to Chi­nese cus­toms data.

Chi­nese con­sumers, ruf­fled by past food scan­dals, see im­ported milk as a safer al­ter­na­tive to do­mes­tic sup­plies, the US De­part­ment of Agri­cul­ture said in May.

Moon Lake has al­ready for­ward-sold more than 15 mil­lion yuan ($2.2 mil­lion) of milk from its Van Diemen’s Land dairies, which it calls VDL Farms.

“This is an ex­cit­ing ven­ture for our com­pany, VDL Farms and po­ten­tially for all Tas­ma­nian pro­duc­ers of fresh, per­ish­able pro­duce such as seafood, fruit and veg­eta­bles,” Shwe said in a state­ment.

About 10 mil­lion liters of milk a year from VDL dairies will be trucked to Ho­bart for pro­cess­ing by Lion Dairy and pack­aged un­der the “VAN Milk” brand, a nod to the dairy op­er­a­tion’s ties to Van Diemen’s Land Co, ac­cord­ing to the state­ment.

Moon Lake is in ad­vanced talks with air­lines and air­ports to be­gin weekly round trips from Ho­bart to Ningbo start­ing in the first quar­ter of 2017, with a view to in­creas­ing the fre­quency to two-to-three times a week in a year, and adding Bei­jing as a des­ti­na­tion, the com­pany said.

The new air freight route will mark the re­turn of in­ter­na­tional de­par­tures from Ho­bart In­ter­na­tional Air­port af­ter a reg­u­lar pas­sen­ger ser­vice to Christ church, New Zealand, was can­celed in the 1980s.

Ini­tially, fresh milk will be sold in 1-liter and 600-mil­lime­ter car­tons, with plans to add yo­gurt and other dairy prod­ucts, Moon Lake said in the state­ment.

“It is great for VDL and the North­west Coast com­mu­nity as it moves the farms from ones that pre­vi­ously just pro­duced milk and watched it leave through the farm gate, to ones that now pro­duce a high­qual­ity, value-added ex­port prod­uct, giv­ing them more se­cu­rity and cer­tainty about prices,” Shwe said.

The milk ex­ports will be a boost for Tas­ma­nia, Aus­tralia’s small­est and least-pop­u­lated state, where an un­em­ploy­ment rate of 6.5 per­cent lags the na­tional rate of 5.6 per­cent, and its cit­i­zens are more de­pen­dent on wel­fare than in any other state.

“VAN Milk” will rep­re­sent the first sale to China of Tas­ma­nian milk by a wholly owned Chi­nese com­pany. Hav­ing di­rect stakes in food-pro­duc­ing com­pa­nies gives Chi­nese firms an ad­van­tage over Aus­tralian com­peti­tors when it comes to sell­ing into China, ac­cord­ing to Michael Har­vey, a se­nior dairy an­a­lyst with Rabobank In­ter­na­tional in Melbourne.

“The ad­van­tage is be­ing able to nav­i­gate some of the com­plex­i­ties in the mar­ket,” he said. Milk from Down Un­der “is held in high regard, so there is a strate­gic pri­or­ity in China to source the prod­uct from Aus­tralia”, he said.

Af­ter Ger­many, Aus­tralia is China’s big­gest sup­plier of liq­uid milk, in­clud­ing UHT prod­ucts, ship­ping 61,184 met­ric tons of the prod­uct, worth A$62 mil­lion, last year, Chi­nese cus­toms data showed.

China’s dairy farms are lo­cated mostly in the coun­try’s cen­tral and north­ern ar­eas, where the cli­mate is more suit­able for rais­ing cat­tle. Weak cold chain lo­gis­tics have made it dif­fi­cult to en­sure the milk’s fresh­ness when it reaches ma­jor mar­kets in north­east­ern and south­ern China.

On top of that, the dis­cov­ery of con­tam­i­nants from melamine to mer­cury have made Chi­nese con­sumers wary of the lo­cal prod­uct.

That’s slowed the in­crease in milk con­sump­tion in China, which av­er­ages about 33 kilo­grams per per­son a year— less than a third of the global mean, ac­cord­ing to the USDA, which said in May that “milk con­sump­tion has plenty of growth po­ten­tial”.

Moon Lake said it plans to in­crease milk pro­duc­tion at its VDL Farms by 80 per­cent within five years. VDL cur­rently pro­duces 7.66 mil­lion kilo­grams of milk solids a year from about 30,000 cows, which graze on 7,000 hectares.

Once “VAN Milk” is es­tab­lished in Ningbo and Bei­jing, Moon Lake wants to take it to Shang­hai, Hangzhou and other Chi­nese cities. Moon Lake’s owner Lu, 46, is also ex­ec­u­tive chair­man and the largest share­holder of Ningbo Xian­feng New Ma­te­rial Co, a builder of sun­screen fab­rics and shades.

“We’ve cho­sen Bei­jing and Ningbo for the ini­tial mar­ket­ing push be­cause Ningbo is Lu’s home­town and he has es­tab­lished net­works to sell the prod­uct,” Shwe said.

“Also, the city has among China’s high­est av­er­age in­comes and is less sat­u­rated with West­ern prod­ucts than, say, Shang­hai,” Shwe added.

We’ve cho­sen Bei­jing and Ningbo for the ini­tial mar­ket­ing push be­cause Ningbo is Lu’s home­town ...” Sean Shwe, man­ag­ing di­rec­tor of Moon Lake In­vest­ments Pty

YU FANGPING / FOR CHINA DAILY

A cus­tomer chooses prod­ucts im­ported from Aus­tralia and New Zealand in Qing­dao, Shan­dong prov­ince.

Lu Xian­feng, Chi­nese busi­ness­man who owns Aus­tralia’s largest dairy op­er­a­tion in Tas­ma­nia

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