MG has separately announced a supply agreement with Indonesia’s leading nutritional company, Kalbe Nutritionals.
Due to the announcements, MG says it is now in a position to proceed with its plans to build a new nutritional powders plant at Koroit in western Victoria, Australia.
MG expects the first phase of the plant to be operational in early 2019.
The agreement with MJN sets out terms of a long-term offtake arrangement, under which MJN will commit to acquire certain volumes of nutritional powders from MG on an annual basis.
This arrangement is in addition to MG’s existing offtake agreements with other long-term customers in the global infant nutrition industry.
Nutritional powders facility construction
Once final terms are formalized, MG will invest $194m-$226m (A$260m-A$300m) at Koroit to construct and commission its new nutritional powders facility, while MJN will co-locate a nutritional packaging plant on the site.
Once completed, the parties envisage the facilities supplying finished products for sale in the Asia Pacific region, including China.
Nutritional powders investment on track
The nutritional powders investment at Koroit is part of MG’s strategy to shift to more stable and higher value added dairy foods.
When combined with MG’s existing fully utilised 18,000 tonnes per annum drying and canning nutritional powders plant in Cobram, MG says the investment will create a sector-leading infant nutrition hub in Victoria, from which MG can supply its global nutritional customers and the company’s own Devondale Natra Start infant formula.
Agreement with KALBE
The long-term nutritionals supply agreement with Indonesian consumer health and infant nutrition company, KALBE, builds on the existing partnership that has seen MG supply dairy powders for use in KALBE’S range of nutritional products including infant and children nutrition brands.
Under the new long-term supply agreement, MG has committed to supply and KALBE has committed to purchase significant minimum annual volumes over time.
“Indonesia is an important Asian growth market for dairy foods. It has one of Asia’s largest paediatric populations, with approximately one in ten people under the age of 51 and this represents a future growth opportunity for MG and our high quality dairy foods products, including infant formula,” MG managing director, Gary Helou said.
Subject to approval
Construction of the nutritional powders investment at Koroit remains subject to final Board approval and MG receiving all required planning approvals.
The Koroit facility, 300km west of Melbourne, is the largest production facility in MG’s portfolio with an intake of close to 1bn liters of milk per annum for the production of skim and whole milk powders, as well as a range of dairy foods including cheese, butter, cream and infant formula.