Chinese investors prepare to open $225M infant formula factory

Canada Royal Milk puts Kingston on Chinese companies’ radar, officials say

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China’s single-largest investment in Canada’s agriculture and food sector – a massive infant formula factory in Kingston – is accelerating interest in Eastern Ontario among businesses in the Asian country, local officials say.

Ian Murdoch, business development officer at Kingston Economic Development Corp., says he’s received several calls from Chinese companies looking at investment opportunities in the area in the last eight months. He credits most of those calls to Feihe International’s construction of a 300,000-square-foot infant formula plant in the city, under the name of Canada Royal Milk.

“An investment like this puts Kingston and the area on the map for Chinese investment, and we’ve had several requests from China looking for different types of businesses,” Murdoch says. 

“The Chinese market probably sees this investment as a safe one, so what other businesses will do now is look at Kingston as a destination that’s welcoming foreign investment, especially from China.”

"A​​​​​n investment like this puts Kingston and the area on the map for Chinese investment"

Chinese investment in Ontario has totalled $14.6 billion since 1993, putting the province third behind Alberta ($49.7 billion) and British Columbia ($20.2 billion), according to the University of Alberta China Institute’s investment tracker.

Institute director Gordon Houlden says the $225-million Canada Royal Milk investment, characterized as a greenfield investment, is the biggest Chinese investment in Canada’s agriculture and food sector, which includes 20 individual investments totalling $448 million.

Seven of those investments have been in Ontario, at a combined value of $264 million. Of the 13 sectors tracked by the institute, Canada’s food and agriculture sector ranks 10th for total Chinese investment. 

“It is reasonable to assume that, given our reputation as a safe and reliable food producer, similar greenfield investments could flow into Canada to meet the needs of China’s growing middle class,” Houlden says.

He adds public commitments in 2018 by Canada’s ambassador to the United States, David MacNaughton, to ensure the Kingston infant formula plant was not adversely affected by the yet-to-be-ratified United States-Mexico-Canada trade agreement, demonstrated the investment’s importance to the Canadian economy.

Houlden says those promises would have reassured Chinese investors and been viewed as an “encouraging sign for business/investor confidence.”

Consumer confidence

Feihe is reportedly the only major Chinese milk powder company to remain successful in China following the 2008 milk scandal that led to the hospitalization of around 54,000 babies. Houlden says other Chinese dairy and infant formula producers may turn to Canada in a bid to “recapture the confidence of consumers.” 

Houlden predicted China would continue to seek investment opportunities and increase protein imports from abroad, given that only 10 per cent of its land is arable and its population of 1.4 billion continues to grow.

Chinese companies have aggressively invested in the dairy and agriculture sectors of countries around the world. For example, Chinese-owned Moon Lake Investments purchased Australia’s largest dairy company – Van Diemen’s Land Co. – in 2016.

The international interest comes despite confusion over Canada Royal Milk’s launch date, listed as both “soon” and in September 2019 on its website.

Canada Royal Milk did not respond to requests for comment.

Murdoch says his understanding is that Canada Royal Milk is still looking to fill positions at the plant before launching.

Ontario Federation of Agriculture director Jackie Kelly-Pemberton says she had been told by her members that the plant would initially begin operations at below capacity because of a lack of local supply.

Kelly-Pemberton says the plant, once it begins operating, would provide “another great avenue” for local farmers as well as opportunities to grow.

She says she has had no indication of further foreign investment in Ontario’s dairy or agricultural sectors but added there were opportunities for similar investments in the province and around the country.