As well as processing more milk it would be able to increase organic product lines including milk, yoghurt and butter.
Organic products already make up about 30-40% of its business and the company was keen to lift that proportion, general manager Corrie den Haring said, with a preference for being a 100% organic processor.
“But not all consumers appreciate organics and are willing to pay,” he said.
“And we don’t want to be limited.”
Demand for organic products had doubled over the last two years and he believed there would be a 20-30% growth year-on-year in both domestic and export markets in the next five years, making their moves to increase capacity and to deal directly with farmer-suppliers a logical one. He believed demand was being fuelled partly by new packaging and brands coming on to the market.
“It’s also milk that tastes like milk,” he said.
“It’s fresh off the farm and has all the right triggers for an informed consumer to purchase without the legacy of other products and controversy. Consumers latch on to part of what they’re told because it suits their ideals and values. There’s an overload of information and people have to try and deal with that, sifting out what’s right and wrong so they have a true understanding.”
Consumers were becoming more attuned to organics as a platform because of concerns over trust and food security.
“We don’t need to sell organic milk but milk which is organically farmed,” he said.
“With organic milk we are selling a product and even people in New Zealand don’t know what that is. We need to preserve the freshness, wholesomeness and cleanliness of production for which NZ is renowned at all costs. If we don’t do that we become a me-too product and compete on price or have a negligible platform which is hard to sustain.”
China is a key export destination with the company already exporting 10-20 tonnes of fresh milk every week to Shanghai and Guangzhou, working with a local importer and distributor. Volumes are growing all the time and it’s now looking to get the milk distributed into tier two cities.
‘We mustn’t view the world through NZ eyes which we do all the time. We must view it through consumers’ eyes.’
The milk is sold in 300ml, one litre and two litre bottles with the most popular size the largest.
They are in discussions to send organic product there in the near future.
He’s worried about the large number of NZ companies sending infant milkpowder to China, saying a broader approach is needed.
“As a farming nation we need to seriously consider how we can have a clear difference particularly in Asia. We mustn’t view the world through NZ eyes which we do all the time. We must view it through consumers’ eyes.”
GVD also had a growing market for its milk in Singapore, Japan and Hong Kong with the latter market taking all of its organic butter.
“It’s very small quantities but they can’t get enough,” he said.
It exports to the South Pacific Basin, supplying cruise ships as well as private luxury yachts through providore companies.
“These are people with the means and ability to purchase the food and beverage products they want.”
Locally the company has enjoyed success with its Barista Velvet milk for the hospitality industry. Its stretching and frothing properties made it a favourite in North Island cafes after being launched 18 months ago. There are plans for expansion and he believes demand will continue to grow.
The company also supplied milk and cream to small cheesemakers and icecream makers, and supplied the hospitality industry with special sauce mixes.
“We like to think we’re a one-stop shop in fresh liquid dairy with a wide capability,” he said.
If the volume of organic dairy products being offered wasn’t increased, the sector would lose customers. Customers had already gone out of organics because of a lack of supply of raw material, he said.
“The organic dairy sector either all packs up and disappears or we grow with diverse products,” he said.
A robust industry model was needed.
“Organic milk production is currently reducing in NZ while the requirement is growing,” den Haring said.
“Suffice to say we’re in a train smash.”
Privately owned by Bruce Pulman of the HEB Group, GVD has an annual turnover of almost $50 million and employs 80 staff across its farming, manufacturing and distribution business units.
It has three distribution depots around the North Island with one in Auckland, one in Waikato and one in Rotorua, serviced by 15 chiller trucks. Once its expansion is complete it will look to develop its distribution network.
Seeking supply
At the moment 20% of Green Valley Dairies’(GVD) milk supply is sourced from Marphona Farms, an organic operation next door, milking up to 3000 cows year round. Another 10% comes from small farmers between Waihi Beach and Mangatawhiri.
Fonterra had “bent over backwards” to supply GVD with 60-70% of its milk last year, including sending it all its organic milk in winter. General manager Corrie den Haring said non-organic milk would still be delivered by Fonterra under DIRA regulations but the co-op said it couldn’t guarantee organic supply, with not enough for its own domestic demands, let alone export. That meant organic milk was being priced off the market when it came to what GVD would have to pay compared with what farmers received.
‘That’s a dumb way to operate. We want Fonterra to have a robust organics programme along with Green Valley.’
The company wanted to build long-term, sustainable supply lines.
Den Haring said there had been strong interest in its multi-year contracts as they seek to lock in milk supply from up to 1500 cows, with 13 new potential suppliers visiting its Mangatawhiri plant in mid-November.
They were not looking to poach organic suppliers from Fonterra, but former organic farmers who were reconverting or low-input farmers who could easily start the transition to become certified were certainly in their sights.
“We’re helping to grow the industry so there’s no point saying to Fonterra suppliers, ‘Will you switch?’” he said.
“That’s a dumb way to operate. We want Fonterra to have a robust organics programme along with Green Valley.”
Some farms might send their conventional supply to the co-op and organic milk to GVD.
They offered a consistent pricing model, flattening out peaks and troughs by encouraging farmers towards the flattest milk supply curve they could achieve.
“We’re not interested in seasonal supply. That’s an unsustainable model.”
GVD’s current suppliers tended towards out-of-season supply, meaning lower peaks in the spring flush.
As GVD sold only on the domestic market or for export to Asian countries, the more stringent certification needed for European or United States markets wasn’t required.
Green Valley Dairies took all Fonterra’s organic milk supply last winter.
The company is targeting three areas for new supply: north of Auckland, south Waikato – where 23 farmers have already expressed interest – and northern Bay of Plenty, to mitigate the threats presented by regional droughts. If there was enough interest from new suppliers it would look to sign contracts and work with them on an individual or collective basis with onfarm help from OrganicAg consultant Bill Quinn if required.
