Dairy Dialog podcast 89: KanPak, Take Two Foods, Novozymes, IATP

By Jim Cornall contact

- Last updated on GMT

Dairy Dialog podcast 89: KanPak, Take Two Foods, Novozymes, IATP
Dairy Dialog podcast 89: KanPak, Take Two Foods, Novozymes, IATP

Related tags: Dairy, Novozymes

On the podcast this week, our guests are Larry McGill, corporate vice president, GSF and CEO of KanPak U.S.; Take Two Foods co-founder and CEO Sarah Pool and co-founder and COO Matt Olsofsky; Ulrich Irgens, from Novozymes OneHealth; and Shefali Sharma, director, European office, Institute for Agriculture and Trade Policy.

KanPak bottles surplus milk to support hunger relief

Two truckloads of surplus milk donations arrived last week at Southern California's Second Harvest Food Bank of Orange County from a dairy production facility in Kansas.

As food banks face increased demand and there is limited freezer capacity for perishable donations, the shelf-stable, whole milk can be distributed immediately, or up to nine months from now.

The milk donation originates from KanPak U.S., a dairy products subsidiary of Golden State Foods (GSF), one of the largest diversified suppliers to the foodservice and retail industries.

KanPak's US and China operations process more than 25m gallons of dairy products each year, applying aseptic processing and packaging technology, so the milk lasts up to nine months without refrigeration.

"I saw on TV that they were throwing milk away, and I thought that was crazy,"​ said Larry McGill, corporate vice president, GSF and CEO of KanPak U.S.

"I knew that there had to be something that we could do to help."

New product launches typically take at least three to four months, including regulatory approvals, package design, and quality assurance protocols. From food manufacturing and distribution to nonprofit partnerships and vendor collaboration, KanPak has leveraged expertise, infrastructure, and relationships from across the GSF group of companies and beyond to kick-start the surplus milk bottling initiative.

Utilizing readily-available capacity on an existing bottling line installed in early 2019, KanPak's initial production run fast-tracked 150,000 eight-ounce bottles of milk to market. Subsequent runs will potentially double that quantity to 30,000 total gallons of long-shelf-life milk.

With transportation support from Centralized Freight Management (CFM), GSF's freight management company, about two-thirds of the first production run has shipped across the county to Second Harvest Food Bank's facility in Irvine, also the home of GSF's global headquarters. Through the non-profit GSF Foundation, two semi-truck loads of donated milk will benefit the most vulnerable community members experiencing food insecurity amid escalating economic hardship.

In addition to Second Harvest, Kansas Food Bank will also receive a milk donation from the first production run, as the first two of many community organizations that KanPak hopes to support.

KanPak said that not only does the effort serve families in need, but it also keeps its production plant associates busy making milk and supporting America's economy.

Novozymes acquires PrecisionBiotics

Danish-headquartered Novozymes has acquired PrecisionBiotics Group Limited for €80m ($m89.7).

Based in Cork, Ireland, PrecisionBiotics Group holds a leading position within probiotics for human gut health and Novozymes said it is well positioned with several clinically backed products already in the market.

“This acquisition fits well with our strategy, Better business with biology, where we have focus on human health as one of our opportunities for growth. With this investment, we take another important step in implementing the strategy and setting a foundation of growth for our business,”​ said Ester Baiget, president and CEO of Novozymes.

PrecisionBiotics Group has expertise within clinical development, upscaling and commercialization and is situated in Cork, Ireland, home to an academic society within human gut health.

“We welcome employees in PrecisionBiotics Group to Novozymes. PrecisionBiotics Group brings in complementary technologies, a similar science-based approach and a matching culture. With our unique expertise within discovery and enzymes and PrecisionBiotics’ strong capabilities and network within probiotics for human health, we will be in a unique position. It’s a position where we can expand market opportunities and develop new and highly efficient products,”​ Baiget said.

Barry Kiely, CEO and co-founder of PrecisionBiotics Group, said, “By becoming a part of Novozymes, we will get a global presence across businesses and new capabilities within science and discovery of new strains. This will help us to grow by developing new products where we can combine enzymes and probiotics.

“Novozymes is a strong company based on science with a global market presence and a purpose to find biological solutions for better lives in a growing world. We look forward to speeding up the development of our pipeline and to a global roll-out of products to accelerate growth.”

Novozymes has established OneHealth to market solutions within human health under one umbrella. The aim is to help people live healthier and better lives by use of probiotics and enzymes.

Novozymes said the acquisition gives it broader access to the overall consumer health market and more specifically a stronger entry point into the €5bn ($5.6bn) human probiotic supplements market which is expected to grow with a high-single-digit CAGR over the next three to five years.

In 2020, the transaction is expected to have a neutral impact on Novozymes’ EBITDA margin but a minor negative impact on the EBIT margin and ROIC including goodwill due to higher invested capital and increased amortizations.

The expected annualized effect of the transaction on the EBITDA margin is neutral while the annualized negative effect on ROIC including goodwill and EBIT margin is roughly 1.0 and 0.5 percentage point respectively.

The acquisition is expected to be EPS accretive by 2022. Novozymes said its dividend policy is unaffected by the acquisition and the stock buyback program will continue as planned.

Barley joins the ranks of dairy-alternative beverages

Take Two Foods has launched the world's first barleymilk into grocery stores, coffee shops, and cafes across the Pacific Northwest and Los Angeles.

Take Two Barleymilk broke onto the plant-based milk-alternative scene in March 2020 with four flavors – Original, Vanilla, Chocolate, and Chef's Blend – and is now available at more than 25 locations and online, shipping to customers nationwide.

Take Two Barleymilk contains protein, fiber and calcium, and has 50% less sugar than other flavored plant-based beverages, the company said.

Rejuvenated barley comes from spent grain, a by-product of the beer-brewing process. Billions of pounds of spent grain are produced each year by the global beer industry. Instead of going to waste or being used to feed livestock, the company said the grain can be upcycled into a nutrient-rich plant-based protein: rejuvenated barley. Take Two uses the rejuvenated barley in its Barleymilk.

"Our commitment is to craft the world's most remarkable plant-based foods made with the highest-quality ingredients, while championing the planet's resources. Food that tastes amazing and truly nourishes, without the environmental impact," ​said co-founder and CEO Sarah Pool.

Dairy companies take issue with IATP report

The Institute for Agriculture and Trade Policy (IATP) has published a new report on the dairy industry, Milking the Planet: How Big Dairy is heating up the planet and hollowing rural communities.

The report notes that 13 of the world’s largest dairy corporations combined to emit more greenhouse gases (GHGs) in 2017 than major polluters BHP, the Australia-based mining, oil and gas giant or ConocoPhillips, the US-based oil company.

However, the dairy industry has hit back, saying the report includes inaccuracies.

The authors of the report said, unlike growing public scrutiny on fossil fuel companies, little public pressure exists to hold global meat and dairy corporations accountable for their emissions, even as scientific evidence mounts that our food system is responsible for up to 37% of all global emissions.

The total combined emissions of the largest dairy corporations rose by 11% in just two years (2015-2017) since the last IATP report, the authors said.

Even as governments signed the Paris Agreement in 2015 to significantly rein in global emissions, the 13 companies’ increase of 32.3m tonnes (MtCO2eq) of GHGs equates to the pollution stemming from 6.9m passenger cars driven in one year (13.6bn liters or 3.6bn gallons of gasoline). Some dairy companies increased their emissions by as much as 30% in the two-year period, the report claims.

The report said the emissions rise occurred amidst a crash in global dairy prices in 2015 and 2016, which was fueled partially by increased production from mega-dairies and global dairy corporations that dumped excess dairy into the global market, pushing prices down below the cost of production and forcing out many small to mid-sized dairy farmers.

Since the first global assessment in 2018 with GRAIN, Emissions Impossible: How big meat and dairy are heating up the planet, the global dairy industry has continued to expand and scale up into new territories through mergers and acquisitions, expanding its collective production by 8% in just two years, the organization said.

The IATP said none of the companies are required by law to publish or verify their climate emissions or present plans to help limit global warming to 1.5˚C. Fewer than half of these companies are publishing their emissions, and none of the 13 have committed to a clear and absolute reduction of emissions from their dairy supply chains or emissions from the animals themselves.

Emissions from dairy animals in the supply chain account for more than 90% of corporate dairy emissions. Three companies out of the 13 have pledged to address scope 3 (dairy supply chain) emissions to any degree.

Some companies track their supply chain emissions through “emissions intensity” reduction targets, however, the IATP said what ultimately counts for a warming climate is whether the companies are reducing their overall emissions at a scale that matters, not their emissions reductions per liter. For example, a FAO study reveals that while the industry reduced emission intensity by 11% between 2005-2015, its overall emissions increased by 18% in that same period.

The European Union (EU), US and New Zealand alone account for nearly half (46%) of all global dairy production. The companies headquartered in these and other industrialized countries account for the lion’s share of global dairy emissions, and these governments are the best placed to enact policies that enable what the IATP said is a just transition for dairy producers towards much more climate resilient and agroecological practices in line with ambitious 2030 and 2050 emissions reduction targets.

The report said the EU’s milk quota removal in 2015, along with other factors, contributed to the second global dairy crisis in 10 years. The EU accounts for more than a quarter of the world’s exports. Its dairy corporations remain competitive in the global market by paying EU farmers below the cost of production and dumping “cheap” dairy exports into developing country markets.

The IATP said if the EU is serious about its climate ambition, not only must it reform the Common Agriculture Policy (CAP) to incentivize environmental resilience, but also it must regulate the market so companies pay producers their cost of production plus a reasonable profit.

The report notes that in spite of 93% of family farms closing since the 1970s, overall dairy production in the US continues to rise due to new or expanding mega-dairies. These are often funded by outside investors and propped up by Farm Bill programs. The lack of environmental enforcement, particularly of their GHG emissions, further abets mega-dairies, the IATP said.

Half of New Zealand’s emissions come from the livestock sector, agricultural emissions having risen by 12% since 1990 with the doubling of its dairy herd and a 600% increase in fertilizer use. New Zealand exports 95% of its milk, largely through Fonterra, the world’s second largest dairy processor.

The report said Fonterra’s nearly 10,000 farmer shareholders incurred huge losses last year, calling into question Fonterra’s corporate structure and investment strategy. In 16 years (2003-2019), New Zealand’s on-farm debt increased by NZ$30.1bn. In 2019, New Zealand became the first country to set GHG reduction targets for agriculture in its new Climate Law.

The IATP said the solution is to redirect public funds away from industrial agriculture, regulating the public health, environmental and social impacts of this extractive model of production and designing incentives to regenerate rural communities through agroecology.

“Governments need to begin by integrating climate goals within their national-level farm policies. These climate goals should address strategies to build climate resilience and reduce emissions,”​ the IATP said.

“Critically, trade rules must be reformed, having thus far driven an export-focused agriculture system while ignoring the climate. International development aid also needs to support an integrated set of social and environmental measures for agroecological systems that support small-scale producers in the Global South.

“For a real climate revolution in the agriculture sector, governments have to transform farm and climate policy in a way that shifts power away from these corporate drivers. They must be courageous enough to enact policy change towards agroecological systems that empower rural producers to do the right thing for their families, communities and the planet.”

Industry response

DairyReporter contacted all 13 of the companies cited in the report, and the response to the report was swift and negative.

Arla Foods and DFA referred to a response from the International Dairy Federation (IDF) and Global Dairy Platform (GDP). You can read the response here​.

Saputo told DairyReporter, “Saputo recognises the environmental and sustainability challenges related to the use of natural resources in milk production and is committed to actively reducing GHG emissions throughout the value chain.  Saputo’s carbon emissions have increased in recent years due to the acquisitions of several large dairy processors in Australia and the UK.

“In February 2020, Saputo announced a formal commitment to make significant and sustainable progress by 2025, on its global climate, water and waste performance. This represents another strong step in the Company’s journey to create shared value for its stakeholders through the Saputo Promise, its approach to social, environmental and economic performance.”

Carolyn Mortland, director global sustainability at Fonterra, told DairyReporter, “Addressing climate change is one of the most challenging global issues facing the dairy industry, and it’s a key focus for Fonterra.

“We’re focused on doing more to reduce our use of fossil fuels in transport and manufacturing and finding ways to manage and mitigate animal emissions on farm. A strong healthy environment is the foundation for a strong economy and sustainable dairy farming.

“However, the IATP Report contains several inaccuracies and we view it as a missed opportunity for real dialogue about solutions to climate change and creating a sustainable future for everyone. For example, the Fonterra emissions are significantly over reported (44m tonnes of C02-e rather than 22m).

“In contrast, a comprehensive and peer-reviewed report released earlier this year found that the carbon footprint of New Zealand’s on-farm milk supply is less than one-third of the global average and up to 30% lower than greenhouse gas footprints of European and North American milk production. A litre of milk produced in New Zealand creates 0.91 kg of CO2 emissions – compared to the global average of 2.5 kg of CO2 emissions.

“Over the last 25 years, New Zealand dairy farmers have reduced on-farm emissions intensity by about 20%. The strongest improvements were from 2007 to 2016. They’ve managed to do this by improving the efficiency of their farming operations.

“There is more work to be done but reports such as the IATP do little to contribute to public debate or new ideas.

“Milk and dairy products are an incredible source of essential nutrients we need in a balanced diet, helping people lead healthy and happy lives. This latest research shows New Zealand is producing some of the best milk with the lowest footprint.”

FrieslandCampina said the IATP report gives a distorted and unfair picture of the dairy industry.

“The authors of the report completely ignore the efforts of dairy companies such as FrieslandCampina to make dairy production more sustainable. The institute wrongly claims that all dairy companies involved are not doing anything to reduce greenhouse gases,”​ a company spokesperson said.

“This completely ignores the sustainability efforts of the Dutch dairy industry and FrieslandCampina in particular. FrieslandCampina has an extensive programme called Foqus planet and works in close cooperation with its member dairy farmers to make dairy production more sustainable.

“FrieslandCampina is also involved in the Sustainable Dairy Chain, a partnership between Dutch dairy companies and dairy farmers to make dairy production more sustainable. One of the consequences of this is that the emission of greenhouse gases per kilogram of milk in the Netherlands between 2015 and 2017 (the period on which the researchers are focusing) has actually fallen by 9%. In 2018 (the last known reporting year) emissions will fall even further.

“In addition, the report wrongly assumes that the scale of the large dairy companies puts small locally operating dairy companies and local farmers at a disadvantage. FrieslandCampina's Dairy Development Programme is specifically intended to support and strengthen local milk production in less developed dairy countries.”

The cooperative added, “With our Dairy Development Programme we train and improve the skills of dairy farmers in Asia, Africa and Eastern Europe with regard to sustainable and efficient farming processes. Since the start of the program in the 1980s, we have directly and indirectly reached more than 250,000 dairy farmers. The DDP supports local (often small) dairy farms in eight countries: China, Indonesia, Malaysia, Nigeria, Pakistan, Romania, Thailand and Vietnam.

“Our goal is to improve the quality of their milk, increase productivity per cow and support farmers in gaining access to the market. In order to achieve those goals, we focus on trainings, knowledge partnerships and projects aimed at improving the dairy farming infrastructure, such as the upgrading of milk collection centres. In this way, we contribute to food security, a more sustainable milk production and raising the living standards of the dairy farmers participating in the program.”

IATP responds

The IATP said the IDF, in its response, may have referred to a 2010 FAO study when citing that dairy accounts for 2.7% of all greenhouse gas emissions. The study also states: “The global dairy sector contributes 4.0 percent to the total global anthropogenic GHG emissions [±26 percent]. This figure includes emissions associated with milk production, processing and transportation, as well as the emissions from meat production from dairy-related culled and fattened animals.”

The IATP added that the IPCC Special report on Land reports: “If emissions associated with pre- and post-production activities in the global food system are included, the emissions are estimated to be 21–37% of total net anthropogenic GHG emissions.”

Furthermore, the IATP said, the FAO notes that 45% of livestock related emissions come from feed.

“In another words, not all dairy systems are equal. Those with a heavy reliance on feed grains versus those with low stocking densities in well-managed pasture are entirely different in terms of their impact on the climate, biodiversity and nitrate pollution,”​ the IATP responded.

“Our report is addressing the “economies of scale” industrial model of production that too often relies on heavy use of feed, feed lots or high stocking densities and poorly managed pasture.”

The organization said Fonterra, which stated its emissions are significantly over reported (44m tonnes of C02-e rather than 22m), needs to take this up with the FAO and publish openly why their emissions are overestimated by the emissions factor that the FAO GLEAM methodology subscribes to New Zealand.

“We are very interested in understanding how Fonterra arrives at its own emissions factor and keen to understand and have peer reviewed why the FAO’s estimates would differ so dramatically from Fonterra’s own assessment given that the dairy industry helped in the creation of the GLEAM methodology,”​ IATP said.

“In fact, Fonterra raised this issue with us last time we published Emissions Impossible with GRAIN in 2018. In our email communication with them, we provided them the emissions factor used and the source (FAO) and welcomed their data to clarify any discrepancies. We did not receive any data clarification from Fonterra.”

Improving the situation

The IATP concluded that change is needed to improve the situation, telling DairyReporter dairy companies and cooperatives should pay farmers the cost of production plus a reasonable profit.

“They should integrate these costs in their growth model and risk management plans, including costs for protecting the planet that include well-managed pasture, low stocking densities, nitrate pollution.

“The costs shouldn’t be borne by dairy farmers that are bound into this system with very few buyers. Governments have to step in and regulate. It is great to see some companies investing in their supply chains and their supplier farmers. Now they need to get their economics right. The taxpayer shouldn’t have to step in and bail producers out because companies are paying below the cost of production.”

 

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