The commissioning of the Rolleston plant marked Westland’s first step towards producing and exporting liquid milk.
It was a significant milestone in Westland’s strategy to move away from the volatile and oversupplied bulk dairy ingredients market, chief executive Rod Quin said.
“Our focus is now on producing high-profit, added-value products for the top end of the market.”
That was in addition to the company’s powder-based products and butter.
Westland’s research showed global dairy prices for products such as bulk milk powder were unlikely to bounce back anytime soon
Global market conditions pointed to at least two more seasons of low milk payouts, Westland told shareholders when the co-operative revised its predicted payout for the 2015-16 season to $3.90-$4/kg MS on March 30.
The clear and consistent message from a visit to Europe was that European milk growth would be higher and more aggressively promoted by European farmers and processors than expected, both within Europe and, more concerning to New Zealand, the international markets, Quin said.
A return to low-cost, pasture-based farming was required for NZ dairy farmers to weather the global supply changes.
“During our meetings in Europe we noted several examples of where high quality, added-value marketers were still doing well and this reinforces Westland’s strategy to continue to move away from bulk commodities into added-value, high-end products.”
The high-value products were a growing and more profitable market to improve returns to shareholders.
That was especially so in China where middle class demand was growing.
“These people are educated and have disposable incomes. They have high expectations around the quality, safety and health properties of dairy products they buy.
“Westland can meet these expectations, which means the future for these products is more secure and more likely to raise and stablise returns to shareholders.”
The UHT cream produced at the new plant would also give Westland the capacity to sell into the Chinese food service and bakery market.
Chinese consumer interest in western-style foods, including bakery goods, was experiencing growth in demand for whipping cream for use in a variety of bakery treats and desserts.
“For both UHT milk and cream we have invested in a considerable amount of research to ensure we have the right combination of high functional performance, quality and taste, which will be the key to winning in this category,” Quin said.
“Already, we have had glowing reports back from China that we are performing very well in taste evaluations.”
Westland’s move into value-added products was already adding almost 20 cents a kilogram of milksolids to shareholder payouts.
“We are on target for that proportion to grow substantially as our latest initiatives, including the new $114m nutritionals dryer in Hokitka and now the UHT plant, come into full production,” Quin said.
Westland had redesigned its Westgold brand, under which the UHT products would be sold alongside Westgold Butter.
“Our early success with UHT orders, nutritional product sales and butter, reinforces our added-value strategy and paints a more optimistic future for our shareholders than if we were to remain primarily a bulk ingredients supplier,” Quin said.
The UHT plant, that would employ 39 people when running at full capacity, was opened by Food Safety Minister Jo Goodhew.
Up to 14,000 litres of white milk and up to 9000 litres of formulated whipping cream would be produced an hour.
Westland was scheduled to launch the first product in China in June.
