Evergrande offers parents added food for thought

Evergrande Group, the Guangzhou-based real estate developer, plans to build a dairy manufacturing operation in China after introducing a new brand of imported infant formula milk powder on Monday.

The brand launch comes after Evergrande bought a majority share in Cowala Dairy Ltd, a leading New Zealand dairy product manufacturer last month.

Cowala has become one of China's leading foreign dairy brands since the country announced new measures to streamline imported infant formula products in May.

"We are introducing this infant formula milk powder for Chinese parents who have long been concerned about the quality and safety of the product for years," said Xu Wen, vice-president of Evergrande Group.

Xu said launching the product was the latest part of Evergrande's strategy to diversify its businesses amid a slowdown in the domestic property market.

Founded in 1997 in Guangzhou, the capital of Guangdong province, Evergrande had primarily focused on real estate before becoming a household name after investing in a Guangzhou-based soccer club in 2010.

After launching a bottled water brand late last year it announced last month it had now established three subsidiary food companies focused on grain and oil, dairy and animal husbandry.

"We are introducing advanced technologies from overseas which will help us build our own dairy manufacturing plant in China," said Xu, but still remained tight-lipped on where it will open, or when.

"We are not only going to sell baby formula products but long term we are aiming to develop a reliable Chinese dairy brand."

Demand for imported milk powder soared in China after 2008 when some Chinese suppliers were found to have added melamine, an industrial chemical that can cause kidney damage and other injuries, to their products. At least six babies died.

By 2013, overseas milk powder brands accounted for 54 percent of the Chinese infant formula milk powder market which is estimated at being worth 100 billion yuan ($16.34 billion), according to Xinhua News Agency.

China introduced new regulations in May to streamline imports of dairy products and domestic dairy enterprises, especially infant formula makers, and companies are now facing increased competition, according to Wang Dingmian, director of the Guangzhou Dairy Industrial Association.

Xinhua has reported that since May more than 1,000 overseas dairy producers, 41 of which make infant formula milk powder, have received entry approval from China's food quality regulator.

Under the new rules, foreign dairy companies must make sure their products comply with Chinese safety standards and are registered with the General Administration of Quality Supervision, Inspection and Quarantine, the top quality watchdog.

"Entering the dairy market, which is not a familiar business for Evergrande, means the company has to strengthen its efforts at ensuring the quality of the product, otherwise customers will lose confidence in Chinese dairy products again," said Wang.