Wahaha eyes Australian dairy farm investment

Hangzhou Wahaha Group Co, China's biggest beverage producer, plans to invest in dairy farms in Western Australia to expand its import channel for milk, Chairman Zong Qinghou said on the sidelines of the ongoing National People's Congress.

Wahaha, with assistance from the state government in Australia - which is conducting a three-month survey of local dairy farms - will make a decision after receiving the result of the survey, perhaps as soon as June, said Zong, an NPC deputy from Zhejiang province.

Zong, who was listed as the country's richest person in 2011, said that Wahaha will also set up milk-powder factories to produce the major ingredients for some of its beverages, which will be shipped to China.

"We consume 50,000 tons of milk powder a year, half of that imported. Our investment in Australia's dairy farms and related industry chains will guarantee stable supplies of quality milk powder, " Zong said.

Wahaha, which reported operating revenue of more than 67 billion yuan ($10.6 billion) in 2011, has abundant cash on hand and anticipates revenue of 85 billion yuan this year, even though rising raw material prices, which rose by 2 billion yuan in 2011, have eroded its profits.

Apart from premier quality, the lower Australian milk prices are also attractive, Zong said.

The average cost of fresh milk is 20 Australian cents (21 US cents) a liter and the retail price is about twice that much, compared with about 3 yuan in China.

However, Zong added that the initial investment in the project will be within A$220 million. "We're very cautious in overseas investment, and have to test the water before gearing up to put more capital into an area that we're not familiar with".

Zong is also considering the expansion of the company's business beyond beverages, perhaps into agriculture or natural resources.

After a brief visit to South Africa just a week ago, he said that more opportunities in the African country are waiting.

"We're still in talks with (government officials there) to discuss possible investment", Zong said, mentioning sectors such as minerals and agricultural products, which are needed in China.

"We keep the opportunities open, and everything is possible," he said.

Zong also expressed interest in investing in the oil and natural gas exploration sector in China and overseas. He suggested that China should relax its curbs on import rights for some of the most-needed natural resources, including crude oil, by allowing private companies to tap into the markets.

The oil and gas sector is dominated by several big State-owned companies, and there has been no sign of relaxation so far.

Private companies, which are more flexible, will adopt more market-oriented policies to avoid risks, Zong said.

More importantly, such companies could help import these resources at more reasonable prices and support the security of the country's energy and natural resources, said Zong.