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Fonterra eyes Chinese consumers with Australian cheese plant

Appetite for pizza fuels surging dairy demand

Fonterra's rebuilt plant in Stanhope, Victoria, can produce 45,000 tons of cheese a year.

MELBOURNE -- Fonterra Co-operative Group, New Zealand's largest dairy company, on Friday opened a new plant in southeastern Australia to make cheeses for China, Japan and other markets.

The 140 million Australian dollar ($111 million) plant in Stanhope, Victoria -- a farming town two hours north of here -- replaces a facility destroyed in a fire in December 2014. The new plant boasts a 50% higher production capacity, letting it churn out 45,000 tons of mozzarella and other cheeses a year. At the opening ceremony, Chairman John Wilson called the facility a strategic investment with an eye toward global cheese consumption.

Dairy product usage in China's restaurant industry has grown 30% over the last five years, according to U.S. research firm Nielsen. Demand is particularly strong for mozzarella cheese as the spread of Western restaurant culture has sparked a pizzeria boom. Half the pizzas eaten in China use Fonterra cheese, the company says.

Cheese from Australia and New Zealand is made with milk from grass-fed cows, giving it a rich flavor and natural yellow shade, said Rene Dedoncker, managing director of Fonterra Australia.

Dedoncker sees room for growth in the Japanese market, noting that cheese consumption is rising 3% a year.

Fonterra has expanded its Australian operations in recent years, capitalizing on lower dairy tariffs from free trade agreements with China and Japan that took effect in 2015. The volume of milk the company processes in Australia had jumped 30% year on year through June, with the bulk of it made into cheese bound for Asia, Dedoncker said.

Fonterra, New Zealand's largest business, is the world's sixth-largest dairy company by sales, according to the Dutch lender Rabobank. It exports dairy products to 140 markets, including Japan, where it accounts for around 30% of cheese imports.

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