The joint venture of KKR, CDH and Modern Dairy aims to build two 10,000-cow farms over a two-year period. The farms will be located in Shanghe county of Eastern China’s Shandong province, which has suitable climate conditions for dairy farming and strong support from the local government. KKR and CDH have previously invested in Modern Dairy in 2008. Since then, Modern Dairy has grown its herd from 24,000 dairy cows and three farms to approximately 180,000 dairy cows and 22 farms. In 2010, Modern Dairy completed an IPO on the Hong Kong Stock Exchange. “The growing demand for premium dairy products is driving strong demand for high quality milk from large scale farms,” said Gao Lina, CEO of Modern Dairy. “Following our successful partnership in Modern Dairy, we have chosen once again to partner with KKR and CDH in a new venture to help meet Chinese demand for safe and high quality milk,” added Madam Gao. David Liu, Member of KKR and Head of KKR China said: “The management of Modern Dairy saw a need arising from increasing demand for safer and healthier milk. The solution was large-scale dairy farm that incorporated global best practices. Today, food safety remains a top priority and this new investment helps increase the supply of premium raw milk in China.” According to Euromonitor, China’s total dairy consumption grew at 10% CAGR over the past five years, with premium dairy product consumption growing significantly faster than the overall market and increasing its market share from 10% to 19%, due to continued consumer concerns with food safety and increasing health awareness. Despite the strong growth, China’s per capita liquid milk consumption is less than 10kg per year, compared to 32 kg in Japan and 78kg in the United States.