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Free trade a $9bn winning formula for milk producer

by MICHAEL MCKENNA
THE AUSTRALIAN, 27 Jul 2015 12:00AM

It may not yet have its own herd of cows but Camperdown Dairy International has already milked the China-Australia free-trade agreement for a $9 billion deal to supply powdered infant formula to the world’s most populous nation.

It may not yet have its own herd of cows but Camperdown Dairy International has already milked the China-Australia free-trade agreement for a $9 billion deal to supply powdered infant formula to the world’s most populous nation.The burgeoning dairy empire, which is in the process of buying grazing land and building factories, last week overcame its final hurdle to secure Chinese accreditation for its tinned formula, which buyers will be able to trace back to the farm with a swipe of their smartphones. Camperdown, which has signed a 15-year deal worth $600 million a year, has been created by coalmining and construction entrepreneur Bill McDonald to trade-off Australia’s increasingly valuable reputation as a source of clean, safe food. The FTA, yet to be ratified by the federal parliament, has made it even more lucrative for Camperdown under the export deal — one of the first to follow the bilateral agreement — with the removal of an estimated 20 per cent in tariffs on powdered formula. As unions prepare for nationwide protests today over the FTA, which Labor says opens the door to Chinese workers, Australian agriculture and food processing companies are moving to use the agreement to boost exports into China. Damien Weis, who secured the deal for Victoria-based Camperdown, said growing concerns about the safety of food in China was creating “massive opportunities’’ for Australian farmers and food manufacturers. The importation of infant formula has grown by a quarter every year since the 2008 “Chinese milk scandal’’ — involving locally made product tainted with chemicals — killed six children and hospitalised more than 50,000. The Camperdown deal will ­triple Australia’s existing exports of infant formula from five million 900gm tins to 15 million tins, with Chinese imports of infant formula currently running at about 120 million tins. Mr Weis, director of Great Wall Capital Trading, which exports the formula to China, said members of the country’s booming middle class were increasingly discerning about the source of their foods and were willing to pay for imported products. “There are 70 million children aged three and under, and their parents, and their grandparents, are buying for that child and they want to know that it is a safe product,’’ he said. “That’s why they will turn to Australian products, because of the reputation for clean, safe food. It is a great time for our farmers, manufacturers and distributors in food and beverage to fill this market. The FTA has really put Australia back on the map in China with infant formula.’’ Mr Weis said the Chinese wanted the Camperdown formula because it had control over the ­entire production process. “Unlike other companies who buy their milk from third-party farms, Camperdown prides itself on following an integrated model, tracking every step of the process by developing their own farms and processing and distribution centres,’’ he said. “This integrated model is one of the first in the world where we are able to track any tin of infant formula right back to the individual cows it came from.” Mr McDonald, one of Queensland’s richest mining services entrepreneurs, began his plunge into Australia’s $4bn dairy ­industry about two years ago. He is upgrading the existing dairy and butter factory in Camperdown, has bought an operational milk powder plant and cannery in Melbourne, and is buying and converting nearby properties into dairy farms as a part of the vertically integrated operation. Under his business model, Camperdown will eventually have a 40,000-strong herd of cows and, through its packaging, carry technology allowing consumers to find out exactly where the formula was made and handled. “It is fully integrated, so the consumers know where the formula is coming from and can trust it,’’ he said. Mr McDonald said Camperdown would eventually produce 100,000 tonnes of milk power a year, with one 10th going to China. The Chinese deal will be backed by similar 15 to 20-year contracts to supply infant formula to other parts of Asia, the Middle East and the US. Earlier this year, the privately owned Camperdown bought a 3000-plus hectare property in Frances, on the Victoria-South Australia border. The company is now in final negotiations to buy five nearby properties and is ­investing more than $120m in processing. More than 200 people are expected to be employed in the venture, including 150 factory workers.