Investment firm KKR, asset fund manager CDH Investments and Modern Dairy announced a joint venture on Tuesday to deliver premium milk to Chinese consumers.

KKR, CDH and Modern Dairy will invest $140 million over the next 18 months to build two new large-scale dairy farms, each with 10,000 head of cattle.

The farms will be located in Shanghe county, Shandong province.

KKR, CDH and Modern Dairy will hold 61.5 percent, 20.5 percent and 18 percent stakes.

KKR and CDH invested in Modern Dairy in 2008.

Since then, Modern Dairy has grown its herd from 24,000 dairy cows and three farms to about 180,000 dairy cows and 22 farms.

In 2010, Modern Dairy completed an IPO on the Hong Kong Stock Exchange.

According to Euromonitor, China's total dairy consumption grew at 10 percent over the past five years, with premium dairy product consumption growing significantly faster than the overall market and increasing its market share from 10 percent to 19 percent. This was due, in part, to continued consumer concern over 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 78 kg in the United States.