Wednesday, July 6, 2022

Large companies moving quickly

Large-scale, rapid moves by international companies to increase their role in the dairy sector have been detailed in a paper presented to the World Dairy Summit. Benoit Rouyer, from France’s Centre National Interprofessionel de L’economie Laitiere (CNIEL), told the International Dairy Federation (IDF) Conference in South Africa last November referred to moves finalised in 2011 and early last year as being the tip of the iceberg. The value of the new investments amounted to US$3.65 billion, which involved 58 projects in 28 countries carried out by 51 companies. Oceania accounted for US$430 million of projects, Asia US$680m, the United States US$650m and Africa more than US$25m. However, by far the largest amount of investment was occurring in Europe, with a total of US$1.86b.

Rouyer listed three investments in New Zealand that had been finalised: Miraka’s US$72m milk powder plant producing 32,000 tonnes of product annually at Mokai; Synlait’s US$80m Darfield plant producing 50,000t of infant formula; and Fonterra’s Darfield plant, which cost US$52m and can produce 2.2m litres of milk powder/day.

Investments that had been announced included expansion at the last site, likely to cost US$91m, where 4.4m l/day would be produced from August this year, the Gardians’ infant formula plant at Balclutha, producing 20,000t of infant formula, Arapuni Milk’s US$81m investment in milk powder processing at Putaruru, Innovation Waikato’s 1.5t/hour dried milk processor in Hamilton, and Westland Milk Products’ new Canterbury plant containing three dryers.

In Australia, Tasmanian Dairy Products has announced a new 33,000t/year milk powder plant costing US$43m at Smithton, in the north west of the state.
In Asia, Nestlé had finalised investments in a US$136m multi-product site in Dubai and a US$95m plant in the Philippines, as well as announcing plans for a US$200m multi-product Indonesian plant.

Fonterra was to build a US$21m milk powder packaging plant in Indonesia, while Australian company Murray Goulburn was building an infant formula packing plant at Qingdao in China. Abbott also plans an infant formula plant in China, costing US$230m, at Jiaxing.

Japanese dairy processing is also growing, with Yotsuba announcing it was building a US$21m skim milk powder (SMP) plant in Hokkaido.

Finalised

In South America Nestlé had finalised a US$140m milk powder plant producing 30,000t/year in Osorno, Chile, while in Paraguay la Holanda had put US$8m into an SMP plant producing 8000t/year.

Announcements had been made by Dairy Farmers America (DFA) to build a whole milk powder (WMP) plant producing 40,000t/year in Nevada, while in Brazil Nestlé is to build a US$31m demineralised whey plant and Laticinos Porto Alegre a US$26m whey powder plant producing 500,000l/day.

Uruguay can look forward to Bonn Gosto building a US$40m SMP plant producing 20,000t/year and Estancias de Lago a US$65m milk powder plant producing  16,500t/year.

In Argentina Mastellore Hermanos will construct a 500,000m l/day whey powder plant costing US$15m and Mead Johnson and Sancor a US$245m infant formula plant.
Rouyer also detailed US$1.21b of investments in Western Europe.

He said the size of plants had grown rapidly, with the new Arla Foods factory just completed in Aylesbury, in the United Kingdom, set to produce one billion litres of pasteurised liquid milk/year. 

Another trend was the multiplication of dairy processor partnerships, such as Fonterra joining AWare to produce cheese and whey in the Netherlands. Companies were also using third-player know-how or branding, as with Murray Goulburn and Arla’s participating in Fonterra’s GlobalDairyTrade (GDT) auction.

Both moves showed a search for added value, as well as the pooling of charges as the result of low profitability on basic products in developed economies. As milk became more valuable, newcomers were attracted and upstream strategies were put in place. Examples were Olam, which bought 19.4% of Open Country Cheese (OCC) in 2007 and took control of NZ Farming Systems Uruguay in 2010. More recently it bought 75% of Russian company Rusmolco, which has 52,000ha of land running 3600 cows and Nigerian dairy processor Kayass last year for US$65m.

Listed company Trigon Agri had 193,500ha running 9600 cows in Russia, Ukraine and Estonia and China Modern Dairy had 20 farms and 150,000 cows in China.
Meanwhile, Fonterra’s five farms in China are expected to produce 150m l/year from 15,000 cows. Nestlé has 10,700 cows on three training farms and intends to invest US$400m in the country in the next five years, while Mongolia-based Mengniu wants to invest US$550m to establish eight to 12 mega-farms there to stop collecting milk from small-scale farms, as it does at present.

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