(Video: Betting big on China's milk thirst reut.rs/2hAqHMA)
By Clyde Russell
LAUNCESTON, Australia Dec 16 How much would you
pay to ensure your milk was fresh and safe? A Chinese
businessman is betting the answer is that his countrymen will
fork out up to 15 times what Australians pay for a litre of the
Lu Xianfeng paid A$280 million ($209 million) earlier this
year to buy Van Dieman's Land Co (VDL), Australia's largest
dairy, located on the windswept northwest coast of the southern
island state of Tasmania.
This was viewed as a top price for the 17,000 hectare
property, but Lu, who built his fortune after founding sun-shade
textile maker Ningbo Xianfeng New Material Co, had a bigger
vision for the company beyond merely being a supplier of milk to
local processors to make cheese and other dairy products.
That vision became a little clearer on Nov. 25 when Lu's
company announced plans to airfreight 50,000 litres of fresh
milk a week from Tasmania's major city Hobart straight to
Ningbo, the second-largest city in China's populous Zhejiang
The initial plan is to use a Qantas Boeing 767
aircraft for the flights, slated to start in the first half of
But Lu is hoping that this is just the beginning, with
company officials saying the ultimate aim is for several flights
a week using a bigger Boeing 747 freighter that will carry not
only milk, but also other fresh Tasmanian products such as
salmon and abalone.
It's a bold vision and one that gives some practical impetus
to the much talked about "mining to dining" boom, in which
Australia ramps up its agricultural exports to China to at least
partially compensate for the winding down of the boom in demand
for minerals and energy that has driven the economy for the past
There are still a few regulatory hurdles to clear and a few
practical limitations as well. Hobart airport still needs to
extend its runway to accommodate larger planes such as 747s.
But, by June Chinese consumers in Ningbo should be able to
purchase fresh milk from a Chinese-owned dairy in Australia.
THE PRICE OF FRESHNESS
David Beca, the chief executive officer of VDL Farms, the
dairy operating company, said it will be possible for milk to
travel from the cow's udder in Tasmania to a glass in Ningbo
within three days - comparable to the time it would take to
reach an Australian supermarket shelf.
The plan is for the milk to be trucked for about seven hours
from VDL to a processing plant near Hobart, where it will be
treated and packaged, and then placed on the aircraft for the 10
to 11 hour flight to China.
Once there, subject to clearance by the Chinese authorities,
the milk will be distributed to retail outlets.
None of this will come cheaply for the Chinese consumers,
with Beca estimating that the price per litre in Ningbo will be
between A$10 and A$15 a litre.
Milk in Tasmanian supermarkets currently sells for about A$1
(75 U.S. cents) a litre, meaning Chinese consumers are paying a
hefty premium for a guarantee of quality and freshness.
There is little doubt about the quality of the product, with
the northwest tip of Tasmania enjoying the cleanest air in the
world and a recent visit to VDL Farms showed lush pastures and
However, for Lu's investment to make high returns the more
wealthy Chinese middle class will have to be convinced that
local dairy products are still of significantly inferior quality
and safety to imported milk.
Certainly, the Chinese dairy industry did itself no favours
through scandals in recent years, including one in 2008 when as
many as 300,000 people became ill and six infants died as a
result of renal problems caused by drinking milk laced with
melamine, added in a bid to boost apparent protein content.
Certainly, the Chinese authorities are trying to boost the
domestic industry, with Agriculture Minister Han Changfu telling
a conference in August that 99.3 percent of domestic fresh milk
and 99.5 percent of milk products had passed quality inspections
The main risk for Lu's company, now named VAN Dairy, is that
Beijing backs up its desire to promote the local dairy industry
by making it harder for imports to enter the country.
But for now, dairy lovers in Ningbo can look forward to
seeing if they can indeed taste the fresh air and the green
grass of Tasmania in their milk, even they will have to pay
handsomely for the privilege.
(Editing by Richard Pullin)