The Dutch cooperative has 19,487 member dairy farmers in the Netherlands, Germany and Belgium, making it one of world’s largest dairy co-ops. Every day it sells dairy products to 1 billion consumers around the world. With annual revenue of $18 billion, FrieslandCampina is one of the world’s five largest dairy companies.
Almost similar to Fonterra in revenue, FrieslandCampina is also one of its biggest competitors. Therefore, the Dutch co-op’s surprise investment in South Canterbury processor Synlait this month is seen as a turning point for New Zealand’s dairy industry.
It’s not so much the New Zealand market that will worry Fonterra because the prize isn’t New Zealand but Asia and its lucrative infant formula trade. With one investment FrieslandCampina has entered New Zealand’s dairy industry, but, more importantly, it has established vital business links with Chinese dairy giant Bright Dairy and Japanese company Mitsui.
The gold of this era is infant formula and New Zealand is the goldmine of quality milk. Our infant formula products are revered by Asian consumers. And Synlait is in an area where food and dairy products and particularly infant formula are the hottest thing in the world.
Fonterra, launching its own infant formula brand in China later this year, suddenly finds a major global competitor exporting New Zealand-made infant formula from its backyard.
Fonterra will have no problems working with FrieslandCampina – DFE Pharma; the world’s leading provider of pharmaceutical grade inhalation lactose is a joint venture between the two co-ops.
But Fonterra will be watching closely. Friesland Campina can increase its stake in Synlait, expand its reach in New Zealand and springboard into Australia. It could even look at building its own processing plant and poaching milk suppliers from Fonterra. In that event the competition from the new entrant would be different than from the likes of Miraka, Open Country Dairy and Westland.
Federated Farmers Dairy chairman Willy Leferink is right: things have become interesting. How Fonterra responds remains to be seen.
Fonterra’s board will be banking on chief executive Theo Spierings for leadership to deal with this new arrival in New Zealand’s dairy market. After all, Spierings was one of the architects of the merger between the Friesland Foods and Campina co-ops that led to the formation of the mega processor in December 2008.
