Oystar reveals strategy for emerging dairy markets

Related tags South america

Oystar says investment in local manufacturing and entry level machines are the keys to unlocking the growth potential of emerging dairy markets.

The process and packaging group recently reported the sale of four packaging and five cartoning machines in Chile, Brazil, and Mexico. Two of these recent orders came from Fonterra subsidiary Soprole, which will install the Multipack 5000 wrapping machine and a fully automatic wrap-around packer in 2010.

Although these are high-end machines, Christian Korte, head of the dairy division at Oystar, told DairyReporter.com that building the business in South America and Asia would mean greater investment in entry level equipment.

For dairy processors in emerging markets, keeping prices low is a much higher priority than wrapping products in sophisticated packaging. Oystar therefore faces the challenge of trying to reset its product line to meet local cost requirements.

Local manufacturing

One effective way of doing this is to build local manufacturing facilities. Oystar has its own manufacturing plant in Brazil, and in Asia, the company has facilities in India and Thailand.

Having local facilities enables Oystar to take advantage of lower labour and transportation costs, as well as avoid potentially high import taxes. In addition, a strong local presence helps the company improve its visibility and understanding of local needs.

Illustrating this point, Korte said reinforcing its sales force in South America was a crucial factor behind the recent business successes there.

Entry level machines

Oystar has also been working through its South American manufacturing unit Oystar Fabrima to develop machines suited to local cost needs. Korte said this means producing simpler machines with lower speeds, less customisation options, and fewer design requirements than would be expected in developed markets.

In South America there is also less need for complex and expensive cleaning options because of the well established cool chain.

By combining local manufacturing and a focus on entry level products Oystar hopes to match its products with local cost requirements and achieve the double digit growth that emerging markets can offer.

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