Milk Mavericks Revisited

Tonight at 6:30pm we have Dr John Penno on a panel discussion chaired by Rod Oram, with Dr Tim Mackle and other guests from Unitec.

John is Chief Executive of Synlait while Fonterra is the 800 pound gorilla of the industry- sort of like David and Goliath except that a $100m baby company isn’t that small.

We hear a bit about Fonterra but not so much about the rest of the industry. Such as Tatua, Synlait,ViaLactia Biosciences, and other stakeholders like DairyNZ who will be represented by Tim Mackle tonight.

Most New Zealanders are “townies” now and in fact only about 11,000 farmer shareholders supply the bulk of NZ’s milk to Fonterra who export about 95% of their product.

Perhaps we should take a bit more interest than we do.

The Dairy sector in New Zealand is a big deal – but imagine you decide to split from the biggest player (Fonterra) and pursue a different high value added strategy – this is what Synlait are doing.

“Picture this: you run a multimillion-dollar business in an industry that is one of our biggest export earners. It’s a hands-on enterprise that requires technical knowledge and business smarts, daily decision-making and constant risks.

Yet you’re stuck in Commodity Hell, reliant on the whims of international markets, exchange rates, rising costs and consumer trends. You have one customer and that customer sets the price of your product*.

You’d be looking for a better way to do business, right?”

That is the opening paragraph from a background feature on Synlait

(*That part has changed a bit with the advent of electronic auctions)

From Fonterra to new frontiers—how Synlait plans to go from farmer to pharma

To read the rest of this feature go http://ow.ly/tRjC

“They’re the first farmers to split from Fonterra and have caught the industry’s attention.”

“Synlait is talking ingredients for functional foods and nutraceuticals, consumer products with health, medicinal and other benefits that make up a US$40 billion global market growing at 20 percent a year.”

“End game

What really makes Synlait’s long-term investment worthwhile is the prospect of tailoring its products for use in the booming nutraceutical market. Yes, ‘nutraceutical’ is an ugly word but it’s worth a lot.

Think of the space between nutrition and pharmaceuticals and you get a massive industry that includes functional foods like fruit drinks, dietary supplements and a burgeoning industry of tablets consisting of kiwifruit extracts, colostrum or bee jelly protein.

Nutraceuticals also form the basis for infant formula, hospital foods, energy drinks and health tonics. Estimates of the size of the market vary wildly from billions to hundreds of billions, depending on definitions.”

“Along the way, they’ll turn the commodity model on its head. Fonterra “won’t turn on a milk drier for an order of less than 1,000 tonnes,” says Penno. Synlait aims to do short-runs of milk powder at competitive prices, thanks to cheaper transport costs and cost savings elsewhere in the system.”

More recently – in NBR – about that milk drier…

milk processor Synlait admits its $100 million equity drive has slowed, it still has plans to double capacity by 2011. NBR http://ow.ly/u12B

See http://ow.ly/ugi4 for more details  – Please tweet Questions and feedback to #UnitecFTF.

If you are quick there may still be seats available. ( Guest bios for speakers.)

If we really are to close the gap with Australia then everyone and every sector has to do better but as Dairy and Tourism are huge so we should get informed don’t you think?