Chinese dairy giant Mengniu eyes formula expansion at Pokeno

Mengniu chief executive, Lu Minfang. Picture/NZ Herald.

China's Mengniu, through its subsidiary Yashili NZ, is looking at expanding its state-of-the-art infant formula plant at Pokeno, the company's chief executive Lu Minfang said.

Lu, in an interview, said plans are afoot for a substantial expansion of the already busy plant, which opened late in 2015 at the end of Auckland's Southern Motorway.

Last month French food giant Danone - which already has close ties with Mengniu and Yashili - said it planned to acquire up to 49 per cent of Yashili NZ.

Pokeno looks like becoming something of an infant formula hub once the Yashili expansion there is complete.

Last month, NZX-listed Synlait Milk said it would develop a nutritional powder manufacturing factory for an estimated $250 million at the small Waikato town.

Lu, a former Danone executive, said Mengniu's investment in Pokeno was aimed at developing high-premium infant formula product.

"As a result, Danone sees that our plant - the level of quality control - our system, and the product that we have developed over time, has really exceeded their standard, and that's why we have become part of their regional supply," Lu said.

Lu said there were "good synergies" between the two companies in Australia, New Zealand and South East Asia "so we said why not become even closer".

As it stands, the Pokeno plant makes UHT from supplied milk powder but Lu said the company wants to upgrade its capability to make it from scratch.

"What we are thinking of is expanding our capacity in Pokeno to be able to produce UHT by ourselves," Lu said.

"This will be our phase Two. Also, with the rising demand for infant formula, from both Danone and us, there is potential need for another blending and packing plant, and spray drying capabilities at our Pokeno plant."

Yashili has already bought the land next to the current plant - equating to about the same area as the current plant, which cost $220 million to build.

The factory takes in milk from other suppliers such as Fonterra and Open Country Dairy.

Lu has also held executive positions with Johnson & Johnson (China) Company Limited and General Electric (China).

Early this year, Danone unveiled a $25 million upgrade and expansion of its Auckland infant formula blending, processing and packaging plant, effectively doubling its production capacity.

Mengniu - one of China's biggest dairy producers - has delved into supplying an a1 beta protein free milk product, made popular by NZX-listed a2 milk.

In March, international food giant Nestle confirmed it is launching an A2 infant formula product in China.

Lu said it was too early to tell whether the science can justify the hype around a1 beta-free milk.

"It's a good concept," he said. "We have seen a lot of different views from a scientific point of view," he said.

"This is not yet a very solid, scientifically proven idea," Lu said.

"I think that it is more of a marketing concept, which was received very well in the market, so that is interesting," he said.

"We are also interested in this kind of concept, so in China we have also tested this kind of concept very well," he said.

Lu said Mengniu had developed an a2 milk product for children in China, using locally sourced milk.

Most cows produce the A1 and A2 versions of beta-casein protein, but about 30 per cent of the world's herd produces just the A2 variety.

Auckland-based a2 Milk believes that the A2 beta-casein protein milk is better for people, particularly those who have trouble digesting milk, and has captured about 10 per cent of the Australian fresh milk market.

In February, dairy co-operative Fonterra said it had formed a strategic alliance with a2 Milk. Hokitika-based Westland Milk is looking at developing an A1 protein-free product.

In February, Happy Valley Milk was granted resource consent to build a factory near Otorohanga that will make A1-free formula.