The acquisition by France’s Lactalis of the baby food manufacturing assets of South Africa’s Aspen Pharmaceutical has taken a surprising turn in that a New Zealand milk factory has been cited as being included in the acquisition.

Aspen Pharmaceutical has a large base in Australia and from here distributes its medicaments into New Zealand.

Aspen, which is Africa’s major home-grown pharmaceutical company, cites “affiliates” in New Zealand.

These in turn are said to possess the rights to sell infant formula into China.

In 2014 Aspen announced that it had “concluded a transaction to acquire a 50% shareholding in New Zealand New Milk Limited (“NZNM”), a producer of infant milk formula in Auckland, New Zealand.”

The announcement went on to say that “NZNM is one of a limited number of companies which holds the required endorsements from the Chinese regulatory authorities to produce infant milk formula for this key territory….”

The announcement concluded in saying that “the investment in NZNM represents another step towards Aspen’s aspirations to enter the Chinese infant milk formula sector, valued at approximately US$15 billion.”

Meanwhile Lactalis, always referred to in France as “the giant,” also controls Parmalat which has a strong base in Australia and which has been mentioned as one of the major campaigners against the New Zealand A2 brand.

This is a seismic-scale reorganisation of the Franco-New Zealand-China milk products market.

Lactalis is privately held in France. Due to a holding company structure its precise size remains unquantified. It is though considered in terms alongside New Zealand’s Fonterra.

The management of the family-owned company was compelled to make an unwanted shift out of the shadows last year when it was discovered that a single production line at one of its plants had become contaminated with salmonella

Worse still, it was a production line for infant formula.

In the event Lactalis has paid the South African company the equivalent of NZ $1.3 billion to get back into this same market and Aspen’s three factories, the one in South Africa and in “Mexico and New Zealand,” are cited as instruments of this strategy.

A suggestion is that this acquisition will give Lactalis a certified entry into China minus the joint ventures and corresponding technology/know-how transfers, voluntary or involuntary, that continue to dog France’s market expansion into the Middle Kingdom.

New Zealand New Milk Ltd describes itself as a “consumer ready Infant formula manufacturer” and notes its two advanced manufacturing facilities complete with their tracking systems.

It notes too that it remains “one of the limited companies which holds the required endorsements from the Chinese regulatory authorities to produce infant formula.”

With transnational deals of this scope underway, it is hard not to imagine that Emmanuel Besnier the third generation head of Lactalis might be on the verge of suggesting to his Parmalat division that it bury the hatchet with A2.

All three finalists had forged quality export in sensitive food categories. The presenters regularly referenced the company’s innovation which was strongly linked to success. David says, “We must not only continue to produce quality products at the highest ethical standard, but our long-term success will be determined by innovation in supply chain, market activities, and our products.”

Infant formula firm NZ New Milk had its first brush with the ExportNZ awards in 2012 when it was a finalist in the emerging exporter category.

It had just a couple of staff and had not started to turn a regular profit.

Now, five years later, it is back as a finalist. But this time, it is in the category for exporters with revenue of more than $25 million a year.

Chief executive David Spurway said the company now had turnover of more than $75m.

It started life purely as a manufacturer exporting to China but now manufactures and sells its own product there. It also has a joint venture selling S26 formula in Australia and is expanding into other markets.

There are now 125 staff employed worldwide, of whom 75 are in New Zealand.  “We entered this year because we wanted to be able to say we were emerging and now we’re in basically the open catergory. That’s nice to be able to say,” he said.

Spurway said achieving that size was a key driver of success in becoming a big exporter of food from New Zealand. “You need to have size and scale because of the quality demanded, particularly in infant formula.”

He said New Zealand had a good reputation internationally for producing clean, good quality products. That helped drive growth of demand for the product, along with a general increase in consumption of the product.

The company had stood out in China by setting up its own distribution and sales team there, he said, giving it full control of its product and a direct interface with consumers. That gave it the edge over companies that relied on an agent or third-party, he said.

It had also invested heavily in manufacturing. It could show it had a sizeable asset on the ground in New Zealand and was clearly working to add value to the milk product.

Spurway said NZ New Milk was only using 50 per cent of its manufacturing capacity. Its focus was on growing the brand in a sustainable way, and developing a brand presence in more Asian markets, as well as working on expansion into the US.

He said it was important to be able to retain some control of the product internationally. “We have had success in China by doing it ourselves and I would be cautious about exporting into areas where we don’t have the resources or ability to control what our product is doing in the market place.”

Consumers had questions, he said, and it was important that the company had a presence there to support the product and boost consumer confidence.

Formula manufacturers had to cater to infants and their parents, he said. “The baby needs to enjoy the food and the caregivers need to be satisfied they got what they expected. Growing a business is not all about finance and size and scale, there’s a lot that happens behind that.”

Spurway said it was satisfying to see the company distributing money back to the New Zealand economy, through its wages to staff and interactions with other businesses.

“There’s a small amount left to grow, and to give us a profit, but year after year, that’s quite neat. That’s rewarding for me. We couldn’t do it without the staff and the people that support the business.”

Mr. Tim Knox, Director of MPI’s Market Access Directorate,

Mr. Peter Chrisp, CEO of NZTE,

Ladies and gentlemen, Good afternoon!

I feel so honored and pleased to be here today to attend this official opening ceremony of NZ NEW Milk new product facility and participate in the exciting tour of the facility just now. Here, I want to thank Mr. David Spurway, CEO of New Milk, and Mr. Zhang Kai, Operational Director of NZ New milk for inviting me to this beautiful event. First of all, Please allow me, on behalf of the Chinese Consulate general in Auckland, to express our warmest congratulations to NZ New Milk for its amazing achievement of development in such a short time.

At this special occasion, I want to take this opportunity to express again my sincere congratulations to Prime Minister John Key for his very successful official visit to China last month. The visit attracted extensive attention and yielded fruitful results in all areas. President Xi Jinping hailed the unprecedented cooperation between our two nations when he met the PM. We believe that the historic visit will further promote the development of the comprehensive strategic partnership between China and NZ based on mutual respect, equality and reciprocity. The Chinese government and people highly appreciate the great vision and leadership of the Right Honorable Prime Minister John Key in strengthening the ties and cooperation with China. It is our strong believe that the sound and good relationship between our two nations is not only beneficial to both countries and peoples but also to the Asia and Pacific and the whole world.

As the Prime minister witnessed by himself in China, the growth of China’s economy is quite considerable. The latest figure shows that GDP growth rate in the first quarter this year was 6.7%, better than expected, with steady increase of consumer spending, investment, production efficiency and jobs creation. Now China is dedicated to the innovative, coordinated, green, open and shared development，and also to the peaceful development and win-win cooperations with outside world. This approach is very much in line with the development strategy of NZ. The economic success of China and New Zealand and bilateral relationship will generate tremendous opportunities for business of both countries and peoples .

Today the celebration of NZ New Milk’s achievement is a strong reflection of the fast growing co-operations between China and New Zealand. It also reminds us of opportunities that two side’s partnership could bring. China hopes to build a long-term agricultural partnership with New Zealand and strengthen cooperation in the whole industrial chain of agriculture and animal husbandry from investment, scientific research, management to food security. China is the world’s biggest consumer of dried milk powders and makes up almost half the world’s imports of whole milk powder. At the same time, the dairy industry is the jewel in the crown of New Zealand. China’s fast development offers a boost for New Zealand dairy producers. At present, New Zealand accounts for over 60% of China import of milk products. And this share will surely be expanded along with the increase of the demand of high quality products by Chinese people in future. We look forward to working with New Zealand government and business sector to focus on promoting cooperation in these key areas. So let us brave the wind and waves and set sail to jointly create an even brighter future for China-New Zealand relations.

Thank you so much again for your support to China and to the cooperation between our two countries and peoples. NZ New Milk, I wish you a greater success in future.

Thank you.