What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The products - Galacto-oligosaccharide (GOS) and Demineralised Whey – are both used in the manufacture of infant formulas, and will be manufactured by Dairy Crest. Fonterra will be the dedicated and exclusive sales channel for the infant formula ingredients produced.
Dairy Crest is entering into a newly-formed joint venture with UK-based Fayrefield Foods to produce the GOS. These plants are expected to begin production in 2015.
Fonterra chief executive Theo Spierings says the agreement is a win-win for all companies which would each bring their proven expertise to the partnership.
"This agreement aligns with Fonterra's global business strategy to develop leading positions in infant formula and growing up milk powders and to extend and grow our infant formula business-to-business ingredient business in China, Europe and other key international markets.
"Infant formula is the fastest growing dairy category in the world. Demand is particularly strong in Asia, where China is the leading global infant formula market. We have well-established relationships in the region, and China specifically, and want to continue servicing our customers with excellent quality ingredients under the NZMP™ brand.
"Dairy Crest shares our absolute commitment to safe, high-quality dairy nutrition. It is a company that possesses proven technical expertise, a quality culture and an excellent source of high-quality whey. It is already developing a demineralised whey powder plant, and has now confirmed plans to develop its Davidstow site where it will produce GOS.
"The agreement also has clear synergies with our investment in a new Whey and Lactose processing factory in Heerenveen, The Netherlands, that is under construction. This new plant will provide the raw material for the manufacture of GOS by Dairy Crest," says Spierings.
Dairy Crest's chief executive, Mark Allen, says "demineralised whey powder and GOS form an important part of Dairy Crest's strategy to grow added value sales. We are excited to be working with Fonterra and Fayrefield Foods to bring these two innovative new products to market. These partnerships, with leading experts in their field, give us exposure to global growth opportunities."
