Fonterra invested about $754m last year for an 18.8 per cent stake in Beingmate.
The tie-up with the Chinese firm, which operates four plants and 80,000 retail outlets across China, includes a distribution deal for Fonterra's Anmum infant formula brand and a joint venture manufacturing operation in Australia.
The New Zealand dairy giant is a latecomer to China's branded baby milk market, having only launched Anmum there in 2013, and is making a big push in that space.
Trace Research director Andrew Zhu said the reasons Beingmate gave for the expected first-half loss were challenges shared by many of its competitors in Asia's biggest economy.
"However not all of them are expecting financial losses like Beingmate," said Zhu, whose firm specialises in researching the Chinese market.
He said Beingmate's profit downgrade had shaken Chinese investors' confidence in the company.
"Fonterra should certainly be worried," he said.
Lukas Paravicini, Fonterra's chief financial officer, said the first half forecast was a "responsible signal to the market" and the co-operative was waiting to see the detailed half-year results.
"Fonterra's partnership with Beingmate is part of our long-term business in China and we remain confident in this," Paravicini said.
He said the company was continuing to see good growth in Anmum sales in the Chinese market.
"The infant formula market in China remains strong and in the last 12 months to May, infant formula sales into China were up 47 per cent compared to the same period last year," Paravicini said.
Beingmate reported a more than 50 per cent lift in 2015 annual profit, to 104m yuan ($22m), although the bottom-line result was reportedly boosted by government subsidies.
Zhu said a "buy one get one free" promotion run by Beingmate with its Chinese distributors towards the end of 2015 might have bolstered its sales numbers for that year.
Fonterra's managing director for Greater China, Christina Zhu, told the Business Herald in May that Beingmate's financial performance was where Fonterra stood to gain the most value from the partnership, rather than through the Anmum distribution deal alone.
"The bigger benefit for Fonterra comes from making sure Beingmate is really successful in this marketplace and Anmum is part of that," she said.
Beingmate shares have slumped by almost 17 per cent since June 12 to open at 12.14 yuan on the Shenzhen exchange today.
Fonterra bought into the company at 18 yuan a share.
