Keytone Dairy signs contract with Walmart subsidiary for supply of branded milk powders to China

Keytone Dairy Corporation ASX KTD Walmart Sam's Club China
Keytone Dairy will supply Sam’s Club-branded private label whole milk powder and skim milk powder to Walmart’s Sam’s Club in China.

Keytone Dairy Corporation (ASX: KTD) has signed a contract with Walmart (China) Investment Co for the manufacture and supply of a range of milk powders to Walmart’s chain of Sam’s Club retail outlets in China.

Under the terms of the contract, the Australian-based, New Zealand-focused company will manufacture Sam’s Club private label-branded whole milk and skim milk powders as and when Walmart (China) places an order.

The terms do not stipulate a specific volume of production, which Keytone confirmed was in line with industry standards for this sort of contract.

The dairy company went through a series of stringent compliance and quality audits by Walmart (China) in order to qualify for the supply arrangement.

Business strategy

Keytone chief executive officer James Gong said the new contract builds on a business strategy focused on expanding distribution and increasing production capacity.

“This contract validates our credentials into China as we continue to work and partner with global names,” he said.

“That a brand of [Walmart’s] calibre has entrusted [us] with manufacturing its branded product is a major milestone for Keytone and an indicator of our ability and reputation in our target market.”

The new contract builds on Keytone’s growing presence in China.

In January, the company began producing a range of diabetic and junior formulas specifically for the Chinese market.

Members only

Sam’s Club is a wholly-owned subsidiary of Walmart Inc – the world’s largest retailer – and boasts 800 high-end retail warehouse clubs globally, servicing more than 50 million personal and business members.

The chain has 597 clubs in the US alone and 208 in other countries, including 18 in China where it launched in 1996.

Each store has an average shopping area of 20,000 square metres and offers 4000 branded bulk grocery lines and general merchandise.

In April, Walmart Inc announced plans to open 40 new stores across China by year end in an effort to grow its regional footprint.

Sam’s Club generated US$59 billion in revenue for the financial year ending 31 January 2018.

At mid-afternoon, shares in Keytone Dairy Corporation were trading 37.50% higher at $0.660.

Imelda Cotton has over 20 years experience as a journalist and communications professional. She has spent the bulk of her career in the resources sector, having also worked directly with oil and gas majors and as a journalist covering a vast array of ASX listed companies within the resources, energy, science and health sectors.