Banned Crafar farm bidders to sell Fonterra milk in China

A company that was last year banned from buying the Crafar family's dairy farms, says it is launching a chain of stores across China to sell New Zealand milk.

Natural Dairy (NZ) Holdings is setting up directly-operated specialty stores as its main distribution channel and will launch a milkpowder product.

"We plan to open 3000 specialty stores in 24 provinces and cities across China to expand our distribution network to cover the whole country, as well as to build a supply base of dairy products from New Zealand easily accessible to consumers in China," Natural Dairy chairman Wu Neng Kun said.

The milk was being supplied by Fonterra's 10,500 farmers, who were required under the cooperative's enabling legislation, the Dairy Industry Restructuring Act (Dira), to provide up to 50 million litres of milk annually to rival processors which request it.

"We are supplying them with milk under the Dira," a Fonterra spokesman told NZPA. "We don't sell them milkpowder."

Natural Dairy originally announced plans for a chain of its own New Zealand dairy farms -- based around financially-troubled properties originally operated by members of the Crafar family -- to produce products such as infant formula for sale in China.

But its bid for the farms, fronted by bankrupt businesswoman May Wang, was knocked back by cabinet ministers Kate Wilkinson and Maurice Williamson because of concerns over the character of some of individuals involved.

Separately, the company has pressed ahead with a bid to produce long-life milk at a Tauranga factory, also for export to China.

The company announced in China it had signed an agreement for Ping An Insurance to provide "quality assurance" for both liquid and powdered milks produced by Natural Dairy.

"The complete quality assurance from Ping An Insurance for our products is intended to build consumer confidence in the dairy market," Mr Wu said.

The company said that the origin of milk was the key to good quality.

"This new liquid milk product is based on imported milk from New Zealand, which is produced and packed under the strict requirements of the dairy industry in New Zealand to maintain the pure taste and nutrition."

Product safety had become a major concern since 22 companies, including the Sanlu joint venture 43 percent owned by Fonterra, sold milk adulterated with melamine which boosted its apparent protein content, but killed babies.

"Leveraging our edge in milk sources and stringent quality control, we provide the high quality products that consumers want as well as fill a gap in the existing market," Mr Wu said.

Fonterra expected China to be the world's largest dairy market in 25 years and has said that demand there would triple over the next decade to be worth about $US70 billion ($NZ91 billion).