Evergrande NZ Cowala launches premium formula brand in drive for Chinese market share

Friday 12th June 2015 1 Comment

Evergrande NZ Cowala Dairy, a China/New Zealand joint venture, launched a premium infant formula brand, Opobaby, which it hopes will help generate sales of 20 million cans into the world's second biggest economy over the next three years.

Chinese conglomerate Evergrande Group, which started out in real estate and has diversified into a range of other businesses including fast moving consumer goods, bought 51 percent of New Zealand based infant formula maker GMP Dairy in October last year. The remaining 49 per cent is held by GMP Pharmaceuticals owned by Auckland based Karl Ye. The group wants to capitalise on China’s high demand for foreign dairy products following a series of tainted milk scandals.

Evergrande Dairy chairman Xu Wen said the group, which had turnover this year of 131.5 billion Chinese yuan and has 475 billion Chinese yuan in assets, was attracted to invest in New Zealand because of its strong reputation for food safety. Opobaby was a high end product that should appeal to Chinese consumers, he said.

GMP Dairy was one of the first foreign infant formula makers to be registered under China’s strict new rules for imported infant formula products introduced in May last year. According to the Xinhua news agency 41 infant formula makers have gained entry approval. Foreign firms are said to control about 40 percent of China's infant formula market, worth an estimated US$16 billion.

In October, Evergrande launched its initial infant formula brand Cowala in China where it made its first appearance in a Chinese Super League football match when the successful Guangzhou Evergrande team, part owned by Alibaba boss Jack Ma, wore Cowala baby formula branded shirts. The team will also officially launch the new Opobaby brand in China after a match later this month.

GMP Dairy produces about half a million cans of infant formula cans a month across all its brands, with 85 percent exported to Hong Kong, South Korea, China, and Australia.

Part owner Karl Ye said he hoped to double the company’s current $50 million or so turnover every year for the next three years following Evergrande’s investment which help a big marketing push in China that it couldn’t have done on its own. The Chinese conglomerate has existing distribution channels in China through its bottled water brand that can be used for the infant formula brands.

Opobaby will be sold at a premium price, some $15 a can more than Cowala, because it includes the fatty acid ingredient Opo, which closely resembles what happens in mother’s milk. The ingredient is supplied by Advanced Lipids, an Israeli/Swedish company, that also sells it to other infant formula makers, including some in New Zealand. The company’s claimed benefits following clinical trials in China and elsewhere are increased energy and calcium absorption, reduced constipation, increased bone strength, less crying, and enhanced gut flora and intestinal health.

Ye said a unique competitive point of difference was the world first patented traceability technology on the cans that allows consumers to use their smartphones to scan a barcode telling them the milk powder’s history and even an x-ray picture of the contents. Further research and development has added another component to the technology - shipping information on every can which should help streamline the process at the Chinese border. The technology can be used on other products.

“We’re just trying to add value rather than have low value commodity exports. New Zealand has good resources to add value to,” Ye said.

Economic Development Minister Steven Joyce said at today’s launch that what the company was doing was key to New Zealand’s food and beverage sector.

“We have to add more value to our core primary sector products and that means doing things differently,” Joyce said. That included more foreign investment, strategic partnerships, and New Zealand firms embedding themselves in global food chains rather than trying to go it alone overseas, he said.

BusinessDesk.co.nz

Comments from our readers

On 12 June 2015 at 6:45 pm Donald said:

Well done this company, its using its smarts to add value to its production & using its Chinese connections to penetrate that market. A lesson here for Fonterra perhaps?