By boosting its own production of UHT milk Fonterra has reaffirmed the plans of would-be rival Hong Kong-listed Natural Dairy (NZ) Holdings that global dairy export opportunities are booming.
Fonterra Brands today announced it would fill an additional 600,000 packs of long-life ultra heat treated milk each week following an $8 million expansion of its Takanini plant in Auckland.
Natural Dairy’s early plans to develop a vertically integrated dairy company in New Zealand, including milk processing capacity, start with a proposal to export 150 million 250ml packets of UHT to China in its first year of operation, adding to its production line every year after that.
However, Fonterra has increased its own production by 30% with the expansion of it south Auckland plant.
Fonterra Brands managing director Peter McClure said the company was seizing the opportunity to increase its footprint in global markets, particularly in Asia and the Pacific.
He said global consumption of UHT was expected to grow at a compound annual rate of 5.2% until 2012, making it one of the fastest growing dairy categories.
Fonterra’s increase in production capacity allows the company to expand its presence in China, Singapore and Hong Kong as well as target new markets in Malaysia, Indonesia and Vietnam.
The expansion means Fonterra can produce 90 million litres of UHT milk a year – more than 1.7 million one litre packs a week.
“Limited domestic dairy supply in Asian countries, growing populations and education about dairy’s nutritional benefits are creating this demand,” he said.
UHT has a nine-month shelf life and does not require refrigeration.
Natural Dairy’s export plans specifically target China and include the purchase of the Crafar portfolio of 16 dairy farms being sold by receivers. The sale is subject to Overseas Investment Office approval.
Global demand for UHT milk was expected to reach 70 billion litres by 2012. The predicted 5.2% growth rate was actually less than the previous four years at about 7.9% a year.
Also, as concerns about food security rise, as highlighted by the Sanlu milk contamination issue in China two years ago, pre-packaged long-life milk is becoming more attractive to consumers.
The rise in UHT milk growth has let to it moving from 18.7% of the liquid dairy market to 23% in 2009.
This level of growth outstrips dairy production increases of 2.2% globally.
Liam Baldwin
Mon, 13 Sep 2010