Fonterra unveils first new processing site in 14 years and ‘key megatrends’

By Ben Bouckley

- Last updated on GMT

Related tags Milk production Milk

Picture Copyright: Fonterra
Picture Copyright: Fonterra
Fonterra plans to build a second milk drier costing NZD $300m at its Darfield site, citing higher milk production levels and increased demand from the Middle East, Southeast Asia and China, while CEO Theo Spierings had pointed to “six key megatrends” affecting the firm’s future strategy.

The firm said that building work begun in 2010 was on track for its first milk drier at Darfield – in the Canterbury region on the South Island – which will be able to process milk from August, while it now plans to build the second, bigger drier on the same site.

Work was due to begin in the next few months, and was due to be complete in time for the 2013 season, according to Fonterra, creating 60 new jobs to add to 100 existing positions.

‘Future proofing’ milk growth

Trade and operations manager Gary Romano said that the second drier would have double the processing capacity of the first, and enable the Canterbury site to process an additional 4.4m litres of milk from the region per day, on top of the 2.2m for the first drier.

Romano said:“Our Darfield site has always been about future proofing Fonterra’s operations for milk production growth in the South Island. Since we first announced plans for Darfield in 2009 we’ve seen even more increases in the regions than anticipated,”​ he said.

He added:“At this rate the first drier will be full within a few years so we need to act now to help meet the existing demand and further growth.”

Fonterra has earmarked the Middle East, South East Asia and China as principal markets for milk powders produced at Darfield.

Asked where Canterbury milk was now processed, a Fonterra spokeswoman told that it was currently received across 28 processing sites on the North and South Islands.“We’ve got South Island sites at Edendale, Clandeboye, Kaikoura, Takaka – so we’ve got quite a few,” ​she said.

So was milk production growth due to a concerted effort on behalf of Fonterra and its member farmers to service lucrative emerging market growth?

“This is down to quite a few things,” ​the spokeswoman said. “Darfield is being built because the milk is already there. So it’s a way of reducing transport links and things like that to our other sites that our further away than Canterbury.

“Milk production can rise due to good grass and things like that, at the moment in New Zealand we’re running at about 10% up on last season.”

Six key ‘megatrends’

Speaking at the CIP/Deutsche Bank New Zealand Conference on March 6, Fonterra CEO Theo Spierings earmarked six ‘key megatrends’ that affected the firm's future strategy, including the rise of emerging markets and ageing populations.

Spierings identified (1) the rise of emerging markets (BRIC), (2) changing demographics – a new middle class, urbanisation, ageing populations, infant populations (3) a focus on nutrition and safety, with “tail-winds provided by key trends”​ such as obesity and ageing (4) volatile commodity price rises (5) sustainability and responsibility.

Finally (6), new technology and innovation was affected by the “globalisation of trends”​ and came against the backdrop of a complex claims environment, Spierings said.

He noted dairy global demand growth of around 3% until 2020, concentrated on emerging markets “all with emerging supply deficits”​,for instance China (milk supply growth, 4%, demand growth 7%) and India (comparative figures are 2% and 10%).

Populations were also ageing in Asia, Spierings said, which created opportunities. Whereas 10 working adults supported one retiree in 2001 (according to McKinsey and Company), by 2021, six working adults in Asia were expected to have to support one retiree, he added.

Spierings said that Fonterra had market leading positions in adult nutrition, pediatrics and other high margin categories across Asia, while it was also investing heavily in B2B nutrition (products include milk protein powder, skim milk powder and buttermilk powder).

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