It appears talk of the demise of the China infant formula market has been greatly exaggerated – at least for Keytone Dairy, which just changed its name to Halo Food (ASX:HLF).

Throughout the past decade, many ASX dairy companies entered the infant formula market in China.

Companies reaped dividends from the country’s growing population as well as its preference for foreign brands with the reputation of local manufacturers tarnished by an enmasse contamination back in 2008.

COVID-19 turned everything on it’s head resulting in the literal elimination of the daigou trade – with borders closed to tourists – as well as less trade between Australia and China with diplomatic tensions reaching arguably the lowest point in the five decades since diplomatic relations were established.

Christchurch based Halo Food is one such company which is both a manufacturer and exporter of dairy products. It owns the Key Dairy brand which sells milk powders among other brands including Tonik beverages.

Today Halo Food signed a Memorandum of Strategic Cooperation with Alibaba-backed food importer and distributor Theland to develop and manufacture Theland’s milk powder products back in New Zealand and export them to China.

The partnership begins this month, will run for at least 2 years and initial confirmed orders total US$1.5 million.

Both companies estimated the partnership could provide US$40 million over the two years although this is not a binding obligation.

Halo’s shares rose 16% this morning following the rare piece of good news for an ASX targeting the Chinese market (iron ore exporters aside), let alone the infant formula sector.

Halo Food (ASX:HLF) share price chart

 

 

Companies hope for a long partnership

Both companies’ CEOs hailed the deal with Halo’s Danny Rothman saying he was thrilled by the deal.

“Theland’s ambitions, strategic priorities and calibre complement our company’s capabilities and first-class facilities in New Zealand and we look forward to a long and prosperous partnership,” he said.

“We will support Theland’s growth ambitions with new product development and the ability to continue to scale across their formulated milk powders as they continue to expand their footprint in China.”

Sheng Wenhao, Theland’s CEO said he was attracted to Halo Food because of its manufacturing facilities.

“Keytone’s advanced facilities aligns with Theland’s objective to provide high quality products and flexible services from green, clean, pristine New Zealand to Chinese consumers,” he said.

“We look forward to a long and successful relationship with Keytone.”

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