Fonterra, the world's largest dairy company, has said that it will "ultimately" incorporate locally-produced milk into its own branded products as the company expands in China’s consumer sector.

"We have been open about our strategy to create an integrated dairy business, which starts with a high quality supply of fresh milk from our China farms," Achyut Kasireddy, vice president of Fonterra China Brands, said in Shanghai yesterday."Ultimately, our goal is to process some of this milk into our own branded products, but we do not have any firm plans for what this may be at this stage."

Fonterra now operates two milk farms in Hebei Province and supplies raw materials to other companies.

The company is to launch a second farming hub in Shanxi Province with 3,000 cattle farms and which is expected to go into production in the second half of 2014, Fonterra said in September.

The company joined competition in the consumer dairy market last month by launching its Anchor-branded UHT (ultra-high-temperature) milk as part of its strategy to increase direct engagement with Chinese consumers.

The milk is imported from New Zealand and was previous supplied in China mainly to hotels and restaurants, Fonterra said.

"Currently, Anchor's physical sales are focused in the Yangtze River Delta area and we are servicing the rest of China through online shopping sites," Kasireddy said."We plan to make Anchor available in more regions."