Glanbia signs landmark deal in China

Glanbia will initially export Avonmore milk for sale in China through the Shanghai-based Bright Foods network, but in time it is expected that the two firms will combine to produce infant formula for the Chinese market.

Glanbia signed a memorandum of understanding with Ge Junjie, vice-president of Bright Foods Group and chairman of Shanghai Tangjiu Group, a subsidiary of Bright Foods, at Shanghai's SIAL, China's largest international food fair.

Bright Foods, or Guangming in Chinese, last year bought Weetabix and is known in China as the maker of White Rabbit sweets.

The deal is expected to deliver in three stages, starting with the import of Avonmore milk products. Working groups will then be set up to develop products and technology, while the final stage will see some kind of co-investment.

While milk is not part of the traditional Chinese diet, the market is growing strongly, with consumption of dairy products growing at an annual compound rate of 20 per cent, compared to stagnant growth in the West in the past decade.

Growing demand
A major part of this is growing demand for infant formula. Mr Ge said that Bright and Glanbia would discuss ways of developing the infant milk formula market in China.

A series of food scandals has destroyed the reputations of local dairy firms and Chinese food companies are keen to work with overseas producers to reassure consumers.

Ireland has a reputation in China as being one of the few places where one can monitor dairy products all the way back to the cow. Ireland however still trails its international rivals in gaining access to the market. New Zealand’s Fronterra dominates and the Danes have also been quick off the mark in getting into the China market.

The Glanbia announcement came as China Mengniu Dairy spent €313.5 million to buy a 26.92 per cent in China Modern Dairy Holdings, China’s largest unpasteurised milk producer, in a strategic move to rebuild trust after a series of scandals left local brands’ reputations in tatters.

Food safety scandals have ranged from the use of the industrial chemical melamine in infant formula, which killed at least six children and sickened nearly 300,000 in 2008, to the use of toxic “gutter”, or reused, cooking oil and , most recently, the organised sale of rat meat as pork.

Recall notice
In July last year, Bright Dairy Food Co posted a recall notice on its website after customers complained online of bad smelling and discoloured liquid in the company's 950ml cartons of Ubest milk.

A mechanical error had tainted the batch with alkaline water and the Shanghai Bureau of Quality and Technical Supervision said it was investigating the case.

Bright Dairy said it would provide door-to-door apologies to customers who bought the bad milk and carry out a strict factory inspection.

This came after the country’s biggest-selling dairy, Inner Mongolia Yili Industrial Group, pulled six months worth of infant formula from the shelves over mercury contamination.