Friday, March 29, 2024

New dairy plant goes organic

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A new dairy factory flag will be flying in Waikato by July next year as a Kiwi-Chinese consortium announces its launch in Otorohanga. With 70% Chinese backing and the remainder coming from three local farmers, the New Zealand Organic and Natural Dairy Company intended to process both organic and conventional milk into powdered, high-value infant formula and nutritional products alongside a cheese production line.
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The Kiwi component was backed by Waikato organic farmers Russell Bayley and David Carey along with local sharemilker Hamish Putt. 

The final signing of the agreement with Chinese investors Herun Holdings marked the start of a project founded on the construction of a 3.4 tonne an hour drying plant in the small south Waikato town, requiring milk collection from about 14,000 cows. 

Between the three local investors more than 10% of the milk was already secured and they were confident once officially launched in October there would be sufficient local supply available.

However, they had not ruled out collection from further afield, including the rest of the North Island for organic supply, while keeping the conventional supply farms “pretty tight” within the south Waikato catchment. 

They cited Otorohanga’s centrality as a key appeal for locating the Swedish pharmaceutical-grade plant they intended to build.

Bayley said the original plan for the project was simply for the three men to be the single supply source for organic powdered milk products under their own label. 

“We worked closely with Innovation Park in Hamilton where there is a drier but we could see it would require a lot of toll processing so we decided to run a full investment proposal and see what interest is out there for processing.”

They had their analysis of the processing potential assessed by DeLoitte’s and found the numbers stacked up to build their own small plant.

At this stage the men are coy about the proportion of supply that will be organic.

While hoping it will form the greater part of supply, they also acknowledged the efforts taken by Fonterra to ramp up its own organic presence in recent months. 

All were Fonterra suppliers, selling their organic milk on conventional supply prices over the coming season.

Interest in the organic sector had also been heightened lately by the Organic Milk Hub being set up to act as a sort of clearing house for organic sourcing and supply to processors.

But they said the company would not be using that as a means of raw milk sourcing or disposal.

“You simply have the problem of traceability once milk goes into the hub and we want to be very certain on product quality from farmgate to final canning process,” Carey said.

“You simply have the problem of traceability once milk goes into the hub and we want to be very certain on product quality from farmgate to final canning process.” 

David Carey

NZ Organic and Natural Dairy Co

They also intended to steer clear of the fresh organic milk price war heating up between the two big players Green Valley Dairies and Fonterra.

“We have no intention of playing in the fresh milk market. Ours will all be formulated, canned and packed for export although we will also have some product for sale here in NZ.”

While saying little about their Chinese investors, Carey confirmed the company Herun Holdings had an established infant formula brand already in place in China.

The Waikato dairy processing landscape had become increasingly cluttered in the past decade, to now include Chinese formula company Yashili at Pokeno, Miraka near Taupo, Open Country at Waharoa and stalwarts Fonterra and Tatua.

However, Carey said the company intended to steer clear of commodity processing, possibly being closest to Tatua in terms of direction and value-add intent.

“We intend to invest in exploring what other products our customers will want to consume and it is a case of aiming to feed the top end of the market, finding out what it is they want for breakfast and making it,” Putt said.

The addition of a cheese-making facility in the plant’s footprint would add to its flexibility, and provide another processing outlet in the event of breakdowns or overflow for formula processing.

“The organic whey produced there will also play a role as part of the infant formula ingredients.”

The cheese plant would have a 40 million litre capacity, in addition to the formula drying plant’s 72 million litre throughput.

While China would be a key market focus, the company intended to also have a second brand aimed at other markets through the Middle East and Asia.

“We believe that because we are organic farmers ourselves, we are more aware than most about the challenges the market has and have some key people waiting in the wings to work for us when this kicks off,” Bayley said.

The company would be announcing supply conditions and payments in October, along with an official launch of its yet to be named brand and logo.

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