PARIS (Reuters) - French dairy cooperative Sodiaal has taken control of infant formula production and other operations at a site in northwest France under a deal with Chinese operator Synutra.
Synutra had spent 170 million euros ($191.73 million) building the factory at Carhaix in Brittany which opened in 2016 with Sodiaal acting as its milk supplier.
The factory was one of a series of Chinese investments in Europe which followed a baby milk contamination scandal in China.
However Synutra entered into talks with Sodiaal last year about acquiring part of the site, amid reports that Synutra had failed to secure expected sales in China.
Sodiaal said it had taken over most of the factory, including production as of Tuesday under an agreement that will see Synutra continue to oversee packaging.
Financial terms were not disclosed.
The deal will allow Sodiaal to ramp up output of infant formula, one of the most lucrative segments in the dairy industry, said Damien Lacombe, the cooperative’s president.
“We are going to be able to double our production rapidly,” he said by telephone. “We had a project to build a new infant formula factory, so we’re going to save ourselves three years.”
Sodiaal will supply half of its production at Carhaix to Synutra, with the other half being marketed to other clients, including in China, Lacombe said.
Depending on types of formula, Carhaix can produce between 65,000 and 80,000 tonnes per year, compared with Sodiaal’s current infant formula output of around 30,000 tonnes, he added.
Synutra had struggled with ramping up production, he said, declining to comment on reports of disputes between the Chinese firm and staff and suppliers.
Sodiaal will keep 180 staff at the Carhaix site, with the rest of the workforce of more than 300 to be retained by Synutra France, Lacombe said.
Sodiaal is France’s largest farmer-owned dairy cooperative, generating sales of 5.1 billion euros in 2017 and collecting 4.7 billion liters of milk.
Reporting by Gus Trompiz; editing by Sudip Kar-Gupta and Jason Neely