What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The company has had a circular business model since its inception in 2008.
A Fonterra business unit, NZAgbiz manufactures livestock nutrition products using primarily Fonterra ingredients and has recently won a Commendation at the prestigious 2018 NZI Sustainable Business Network Awards for its work.
General Manager Greg Cate says from the beginning the NZAgbiz aim was to better use Fonterra’s loss streams for the benefit of farmers and the co-op, and avoid sending it to landfills.
Loss streams include materials such as oversized sifter particles, fine powder particles and cheese trims. Because the material is not suitable for human consumption, it would normally end up as landfill waste.
The Waikato company works on a ‘going circular economy’. Each year it gets assorted dairy products no good for human consumption and from this makes milk replacers for calves (Ancalf), pigs, sheep and goats. Ancalf is NZAgbiz’s biggest seller.
Some cheese and butter loss streams are sold to pig farmers.
“We take this material from Fonterra and other dairy manufacturing plants and re-work it into useful, high-quality animal nutrition products such as calf milk replacers (CMRs), pig products and animal health supplements such as probiotics, colostrum powder and electrolyte replacements,” says Cate.
“By recycling dairy industry products we reduce the amount of material going to landfill and maximise the life of the dairy industry’s downgrade product.”
Any product NZAgbiz cannot re-work is on-sold as ingredients for stock feeds, soaps and bio fuels.
An important aim was to enable farmers to feed calves without using the more valuable milk from their vats. About two million calves have been raised on NZAgbiz CMRs.
Quality control is important, says Cate. “We test for things similar to a Fonterra factory but using different thresholds for animal versus people.
“We have a good reputation for consistent high quality. People know what they are getting and can trust us; and we are audited by an external party.”
Going circular
The NZAgbiz model was commended at the 2018 NZI Sustainable Business Network Awards in the popular ‘going circular’ category.
‘Going circular’ refers to designing products to help create a circular economy in New Zealand.
As one of 11 finalists in the category, NZAgbiz beat nine finalists and lost to one -- the ethical beauty brand Ethique.
