Meiji to invest US$254 million in China dairy farm operator

Major Japanese dairy producer, Meiji Co. will acquire a 25% stake in a major dairy farm operator in China to ramp up its milk production while cashing in on growing milk demand from health and quality conscious Chinese consumers. Meiji will acquire the stake in the dairy farm operator, AustAsia Investment Holdings Pte Ltd for US$254 million from its Singapore-listed parent company, Japfa Ltd, making this transaction Meiji’s largest capital investment ever.
AustAsia started dairy farming business in mainland China in 2009 and it now runs 7 dairy firms; five in Shandong Province and 2 in Inner Mongolia Autonomous Region – with about 80,000 dairy cows. Daily raw milk output stands at more than 1,000 tonnes, said Tomohisa Kamei, a Meiji spokesperson.
AustAsia sells milk under the Greenfields brand at retail outlets in China while supplying it to coffee chains like Costa Coffee amongst others.
Meiji started procuring AustAsia’ raw milk in 2015 and it aims to source more high-quality raw milk to expand its milk and yogurt production in China. With the deal, Japfa will continue to supply raw milk to Meiji on a 5-year rolling basis, renewable annually. Tomohisa added, “An AustAsia milk cow in China boasts high-productivity, delivering about 34kg per day, compared to those in Japan at around 10 kg.”
Meiji plans to add production lines for milk, probiotic drinks and yogurts at Meiji Dairies (Suzhou) Co., a local manufacturing unit, and to begin operation in March 2021. Meiji Dairies (Tianjin) Co., established in September 2019, will also begin production in the 2nd half of fiscal 2022.
In China, Meiji posted sales of Rmb 450 million (US$63.6 million) in 2018 for its dairy products and it hopes to double this figure by 2023.
Japfa, which produces items from animal proteins to dairy and consumer products, currently owns 100% stake in AustAsia and plans to restructure the subsidiary to transform it into a firm focusing mainly on dairy operations in China. With the acquisition, Japfa will hold the remainding 75% shares and will maintain operational control.
Japfa also undertakes dairy farming and milk production in Indonesia. The acquisition, which is still subject to Japfa shareholder approval, is expected to be close in July.