Chinese giant turns to France to meet soaring demand for baby formula

[CARHAIX-PLOUGUER, France] China's third largest baby formula producer on Wednesday opened a vast plant in France's Brittany region, whose prized dairy cows are set to contribute 100,000 tons of powdered milk a year to a growing Chinese market that mistrusts domestic production.

Synutra's 170 million euro (S$259 million) factory covers some 38,000 sq m near the small town of Carhaix.

The company said it was China's largest foreign investment in the milk processing sector.

The factory will be supplied by Sodiaal, France's biggest dairy cooperative, which has signed a 10-year contract with the Chinese firm.

Sodiaal will collect 288 million litres of milk a year from 800 farmers.

"No infant milk formula company in the world can produce such quantities," Synutra France CEO Christian Mazuray told journalists at the opening.

He said the Carhaix region had been chosen because it was "in the heart of a dairy region known for the exceptional quality of its raw materials and for its industrial know-how."

France's dairy sector is emerging from a turbulent summer marked by protests by farmers demanding higher milk prices.

Mr Mazuray said Synutra would pay market rates for its milk, saying the company was more concerned about the quality and traceability of its products than the cost of milk.

China has been a major importer of dairy products for 25 years and is now the world's biggest importer of such goods.

Since 2000 Beijing has encouraged citizens to drink more milk.

This state endorsement, coupled with a contamination scandal that affected 300,000 babies - six of whom died - has encouraged investors to look oversees, including to France, to meet demand.

"Since 2008, the Chinese milk sector has seen repeated health scandals and the Chinese population no longer wants to consume Chinese baby milk," explained Gerard Calbrix, an economist at ATLA, an association of French dairy processors.

In 2009, domestic milk production in China plunged 20 per cent and imports began to soar.

Set up in 1998, Synutra, which specialises in upmarket products, employs 12,000 people across the world.

The addition to the the Brittany plant is set to almost double Syuntra's 2014 turnover of 517 million euros to 1.17 billion euros within 12 to 18 months.

AFP