Tim Binsted
Published: September 20, 2014 - 7:44AM
Bega Cheese has inked a $100 million supply and distribution agreement with Chinese retailer Chongqing General Trading Group to supply Bega-branded long-life milk to China.
The agreement is expected to generate around $100 million worth of revenue for Bega over five years. Bega reported revenues of $1.07 billion in 2013-14.
Perhaps more significantly, there is scope to build further on the partnership and help Bega capitalise on the booming demand for dairy products in China.
"Bega and CGTG see this as the basis for a broader commercial relationship in the future," the company said in a statement to the ASX.
Bega Cheese chairman Barry Irvin and chief executive Aidan Coleman were in Chongqing, south-west China, to sign the deal.
"We see this as a first step in developing a comprehensive UHT [long life milk] offering in the future," Mr Coleman said.
There are around 32 million people in the Chongqing region and CGTG has close to a 50 per cent share of the area's retailing market in food and general merchandise.
News of the deal comes as federal Agriculture Minister Barnaby Joyce is in China with an industry delegation looking to bolster Australia's reputation as a top-quality, safe producer of agricultural products.
Australia is in the midst of tough trade talks with China - which is a key market for agriculture given the rapid growth in demand for protein and dairy products.
Dairy exporters such as Warrnambool Cheese & Butter and Murray Goulburn are desperate for a "New Zealand-plus" deal that gives Australia parity with rival powerhouse New Zealand as a minimum.
A tariff of around 15 per cent is levied on Australian dairy products.
Federal Trade and Investment Minister Andrew Robb, who has already sealed free trade deals with South Korea and Japan, played down expectations for the dairy industry in the prospective FTA on Monday.
Bega Cheese shares rose 1¢ to $5.03 on Friday.
This story was found at: http://www.smh.com.au/business/bega-cheese-in-100m-supply-deal-with-china-20140919-10jgfd.html
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