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 new $11 million upgrade of the lactoferrin plant at the co-op's Hautapu site is now running at full volume, helping to meet growing worldwide demand for the product known as 'pink gold'.
Lactoferrin is a naturally occurring iron-binding protein found in milk and is in high demand, particularly in Asia, for a wide range of nutritional applications from infant formula through to health foods and yoghurts.
Fonterra managing director global operations Robert Spurway says, although the volumes of lactoferrin the co-op exports seem small, compared to many other dairy ingredients, a little goes a long way.
"While we're seeing strong growth in demand for lactoferrin across a number of our key markets, the fact that we measure growth for this product in kilograms rather than in tonnes gives an idea as to the potency and value of lactoferrin.
"It really is the 'icing on the cake' for Fonterra, as it can be extracted out of skimmed milk or whey, without impacting the use of that milk in other dairy products."
Extracting this specialised protein from milk is something very few dairy manufacturers can do, due to the investment needed in both capital and research and development, says Spurway.
"Our ability to create value through the production of high quality lactoferrin is largely down to the work of our team at the Fonterra Research and Development Centre. For more than a decade they have been honing our processes and helping to improve our cost and speed of production, as well as the overall quality of the end product."
Fonterra chief science and technology officer Dr Jeremy Hill says growing demand for lactoferrin in many Asian countries is due to research showing the diverse biological functions of the protein.
"Lactoferrin is present in human milk in high proportions, and breast-fed infants will consume up to three grams a day during their first week of life. This abundance of lactoferrin in human milk is considered to be an indication of its importance in infant nutrition," says Hill.
"Because of this, our customers have invested in extensive research and trials on the benefits of lactoferrin particularly to the immune system, given its strong anti-microbial and anti-inflammatory properties."
