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KKR, CDH, Modern Dairy Partner To Build Large Scale Farms In Shandong Province

Stocks in this article: KKR

KKR, CDH and Modern Dairy today announced the formation of a new joint venture designed to deliver premium raw milk to Chinese consumers. Under the terms of the agreement, KKR, CDH and Modern Dairy will invest US$140 million over the next 18 months to build two new large-scale dairy farms in China.

KKR and CDH have previously invested in Modern Dairy in 2008. Since then, Modern Dairy has grown its herd from 24,000 dairy cows and three farms to approximately 180,000 dairy cows and 22 farms. In 2010, Modern Dairy completed an IPO on the Hong Kong Stock Exchange.

“The growing demand for premium dairy products is driving strong demand for high quality milk from large scale farms,” said Gao Lina, CEO of Modern Dairy. “Following our successful partnership in Modern Dairy, we have chosen once again to partner with KKR and CDH in a new venture to help meet Chinese demand for safe and high quality milk,” added Madam Gao.

David Liu, Member of KKR and Head of KKR China said: “The management of Modern Dairy saw a need arising from increasing demand for safer and healthier milk. The solution was large-scale dairy farm that incorporated global best practices. Today, food safety remains a top priority and this new investment helps increase the supply of premium raw milk in China."

According to Euromonitor, China’s total dairy consumption grew at 10% CAGR over the past five years, with premium dairy product consumption growing significantly faster than the overall market and increasing its market share from 10% to 19%, due to continued consumer concerns with food safety and increasing health awareness. Despite the strong growth, China’s per capita liquid milk consumption is less than 10kg per year, compared to 32 kg in Japan and 78kg in the United States.

Julian Wolhardt, Member of KKR, said: “We had a successful investment previously with Modern Dairy. With this new joint venture, we are following a successful model to work with an experienced local management team, using our capital, global resources and the operational value-add KKR brings to the partnership to help meet the growing demand.”

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