Ontario supports Chinese dairy group’s C$225m baby formula plant

The investment will allow the country to sell more products derived from raw milk, the exports of which are capped by the WTO.

The Provincial Government of Ontario has invested C$24 million ($18.7 million; €15.8 million) to support a C$225 million local infant formula production plant being built by Feihe International, a Chinese dairy company.

The investment comes in the form of a grant to Canada Royal Milk, a Feihe subsidiary, from Ontario’s Food and Beverage Growth Fund, which is designed to support initiatives with more than C$5 million in costs that create sustainable jobs, strengthen supply chains or promote greater market access.

The 320,000-square-foot facility will be located in the city of Kingston, in southeastern Ontario, and create 277 local jobs related to the production of infant formula derived from both cow and goat milk. Long-term plans call for the production of nutraceutical products, according to a project overview by the Kingston Economic Development Corporation.

“Ontario and Qiqihar, Heilongjiang, where Feihe’s milk resources are located, are both situated in the World’s Golden Milk Belt at 47 degrees north latitude where its natural environment is the most ideal place for producing premium quality dairy products,” Feihe International chairman Youbin Leng said.

WTO limits

The Kingston plant is set to be the first outside China for Beijing-headquartered Feihe, which was founded in 1962 and operates a network of more than 200 company-owned milk collection stations to provide infant formula, milk powder and other products to more than 100,000 retail outlets throughout the country.

Carey Bidtnes, a business development officer with the Kingston Economic Development Corporation, told Agri Investor that Feihe’s investment in the baby formula plant has been supported by both federal Canadian and provincial Ontario governments as part of an effort to cultivate the internal dairy market.

Bidtnes said WTO trade rules set an upper limit on how much raw dairy product can be exported from Canada and that the Feihe plant will allow the company to export baby formula derived from milk that might otherwise go into lower-value products.

“They are not bringing China over into a plant in Ontario”
Carey Bidtnes, Kingston Economic Development Corporation

“They will be producing a high-value, Canadian-branded infant formula, with Canadian milk, which will give them access to markets in Asia that they haven’t had access to before,” Bidtnes said. “It gives them a strategic advantage in terms of the brand of Canada as a whole in China and allows our diary industry to continue to be healthy and to grow.”

The Canadian brand is especially valuable to consumers in China, where the reputation of domestic formula producers is still recovering from a 2008 scandal in which melamine, a hard-plastic material, was detected in products. Bidtnes said Feihe was not involved in that incident.

There are misperceptions about working with a Chinese company, according to Bidtnes, who highlighted the fact that while Feihe will work with a Chinese partner on process engineering and equipment, local labor is being employed to build the plant, which broke ground on November 10 and is expected to be operational by 2020.

“They are not bringing China over into a plant in Ontario,” she said.