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.
So said Kim Campbell, chief executive of the Employers and Manufacturers Association, as Fonterra’s global foodservice business won the 2017 ExportNZ Supreme Award for Auckland and Waikato regions.
It’s a success Campbell, dairy farmers and employees – in fact all New Zealand -- can take pride in; we all have a stake in this.
Fonterra’s foodservice unit is growing at 20% a year and we aim to build this into a $5 billion-a-year business by 2023, in line with the Government’s plan to double the value of primary sector exports by 2025.
We’re always looking to maximise the value of milk, and science and R&D are creating high-return products for traditional and new markets. We add extra value to about 70% of our export dairy products, by innovation, brands, partnerships and services.
Almost five billion litres of co-op milk goes into the foodservice business and we will add another 400 million litres this financial year, meaning 12% of the milk pool will go into global foodservice products.
R&D by scientists and researchers in the co-op and in universities and research centres in NZ and offshore contribute to developing these products. For example, our quick-frozen mozzarella is used as topping on half the pizzas in China, made in our new $240m plant in Clandeboye -- the biggest spend on a foodservice-product plant by the NZ dairy industry.
Also, innovations in UHT beverages and whipping creams are often challenging markets and supply chains. Like innovative companies such as Apple, Fonterra is always working on the next evolution. These and other new products in our pipeline will help build our $5b global foodservice business and contribute to the Government reaching its primary sector export targets.
All NZ -- not just farmers -- have a stake in this success because much of the science behind new products, the growth of the co-op’s foodservice business and the export award has been funded by the Transforming the Dairy Value Chain (TDVC) Primary Growth Partnership, a seven-year, $170m scheme led by Fonterra and DairyNZ and partnered by the Ministry for Primary Industries.
The TDVC has helped the co-op achieve a global strategy at a scale and speed otherwise impossible. It has helped fund the work of some of NZ’s best and brightest young minds, bringing more people into dairy science careers and into contact with the world’s top scientists.
An independent panel of global dairy experts is highly rating our food science, saying it may be the top science scheme of its type in the world. This is reflected in the co-op’s awards for innovation and R&D, notably NZ Innovators awards in each of the past four years. Three of these, including the mozzarella and research into paediatric nutrition, are seen as cutting-edge science.
- Judith Swales is Fonterra’s chief operating officer, velocity and innovation.
