Fonterra’s Anchor dairy arrives in Ethiopia and Australia

New Zealand’s oldest dairy brand, Anchor, has appealed to new markets in Ethiopia and Australia with its range of milk powders and Anchor creams for various market groups.

Developing highly nutritious, top quality dairy products for new markets has allowed product innovations to dictate Anchor’s market position and the success from which the consumer brand can be further developed. 

According to Fonterra’s Global Brands and Nutrition Managing Director, Rene Dedoncker, “Ethiopia is the second largest population in Africa with close to 100 million people and the fastest growing economy in the world. However, despite the staggering economic growth more than 40 per cent of its population are malnourished and lack access to affordable nutrition.”

Fonterra worked with the Food and Nutrition Society to ensure that its products provided children with essential nutrients that would otherwise be missing from their diet.

The final production, packaging and distribution of the new Anchor product was completed at a far lower cost due to Fonterra’s joint venture with NZ local partner Faffa Foods.

Dedoncker believes that there is an opportunity to put cream on the weekly shopping list by motivating customers to buy it all year round and package it in cook-friendly formats.

The new range of Anchor cream will be available exclusively in Woolworth’s supermarkets across Australia, where the chilled cream category is worth over $300 million despite a decline in the number of fresh cream purchases.

Innovative bottle sizes designed to ensure precise pouring and easy measurement have also been added to the Australian market. Dedoncker believes that Fonterra’s experience in driving growth in the culinary market places it in the perfect position to capitalise on the Australian opportunity. 

This partnership, in conjunction with the 10-year contract to supply fresh white milk for Woolworths Select, is designed to help strengthen Fonterra’s partnership with the Australian retailer, said Fonterra. 

 

Pepsi and Coke battle over Chobani

According to a Reuters report this morning, PepsiCo and Coca-Cola are in talks to invest in Chobani for as much $USD 3 billion for between 10 per cent and 20 per cent of the yogurt maker's equity.

Chobani is looking for a strategic investor to help expand its supply chain, distribution, manufacturing base and geographic footprint for its popular yogurts like Flip, which combine yogurt with flavors such as peanut butter and coffee, the Reuters report said.

Chobani was founded in 2005 by Turkish immigrant Hamdi Ulukaya. 

While its yogurt has become one of the top-selling yoghurt brands in the United States, Chobani has also experienced some growing pains, with private equity firm TPG Capital LP giving it a $USD750 million loan last year to help it fund a turnaround.

Fonterra disappointed over credit downgrade

Fonterra Co-operative Group Limited has been notified today that rating agency Standard and Poor’s has downgraded the Co-operative’s credit rating from A to A-.

Chief Financial Officer Lukas Paravicini said: “Our underlying financial strength and credit quality remain strong. This is recognised by Standard and Poor’s maintaining our rating in the ‘A’ category and reflects our fundamental strength and financial discipline.

“It is important to note that the revised rating will not have any impact on Fonterra’s strategy or on farmer shareholder payout.”

Mr. Paravicini said the Co-operative’s current debt is at expected levels for this stage of the investment cycle.

“We carefully planned our investment strategy by first reducing our gearing over a number of years to enable us to make higher levels of investment in key strategic opportunities.

“These investments are making the Co-operative stronger and positioning us well for the future. We have built additional manufacturing capacity in our home base of New Zealand which is improving returns by giving more product options during the peak production period and our planned investments in China are building our presence in our number one strategic market,” Mr. Paravicini said.

“In addition we are progressing well with our business transformation and this will further strengthen our financial position.  Global dairy prices are also recovering which is a positive development, particularly for our farmer shareholders,” Mr. Paravicini said.

“Given this, we are disappointed that Standard and Poor’s has not reconfirmed its rating from April, especially when global dairy prices have significantly improved and we have continued our strong financial discipline,” Mr Paravicini said.

Is it the Year of the Lion for dairy exports to China?

Australia’ biggest fresh dairy company, the Japanese-owned Lion, has announced a second marketing partnership in China.

The Australian and others report that it will partner with Canton American Flower Lounge to sell Pura regular and UHT milk and other dairy brands in Guangdong province (population 104 million).

Its Pura brand has lost market share in Australia in the last year and is under pressure from cheaper, private label supermarket milk.

The Australian Financial Review reports that Chinese consumers, unlike local shoppers, are happy to pay extra for premium Australian brands.

"They are very thoughtful consumers about the nutritional value of what they consume, and are interested in the authenticity of the brand," managing director of Lion’s dairy business in Asia, Duncan Makeig, told The AFR.

"They'll get online and check our Australian websites … they want to eat what Australians consumers eat and drink, and they don't want to buy these made-up brands with a kangaroo on it – they want the authentic Australian product."

Fonterra remains positive despite global challenges

Fonterra Co-operative Group has announced a net profit after tax of $506 million for the financial year ended 31 July 2015 – up 183 per cent – after a stronger second half performance in difficult market conditions.

The Co-operative will pay a final Cash Payout of $4.65 for the 2015 season for a 100 per cent share-backed farmer, comprising a Farmgate Milk Price of $4.40 per kgMS and a dividend of 25 cents per share. 

Chairman John Wilson said extremely challenging trading conditions globally had affected all parts of the Co-operative’s business.
 
“Falling global dairy prices due to a supply and demand imbalance impacted the Milk Price, while the dividend reflected higher funding costs following significant investment in capacity to support milk growth in New Zealand, essential investments in the key strategic market of China, and the costs of maintaining a higher Advance Rate through the season.
 
“The strengthening of performance in the second half resulted in normalised earnings before interest and tax almost doubling, with good growth in our consumer and foodservice businesses and the results of a major push in our ingredients business to offset low milk prices with improved margins.”
 
Mr Wilson said that despite drought in some regions and floods late in the season, milk collection across New Zealand for the 2014/15 season to 31 May 2015 was 1,614 million kgMS, up two per cent on the previous season.

Fonterra opens new manufacturing facility in Indonesia

Fonterra Co-operative Group has officially opened its new blending and packing plant in Indonesia – its first manufacturing facility in the country. 

 Chairman John Wilson said the plant is Fonterra’s largest investment in ASEAN in the last decade and will support the growth of Fonterra’s brands – Anmum, Anlene and Anchor Boneeto – in Indonesia. 
 
“Fonterra has been supplying high quality dairy nutrition to Indonesia for more than 30 years and today it is one of our most important global markets. The opening of our new plant is an exciting step forward in our relationship with the country and local dairy industry,” he said.
 
Fonterra Managing Director Asia, Middle-East, Africa (AsiaMEA) Johan Priem said the investment strategically positions Fonterra to help meet Indonesia’s continuous growing demand for dairy nutrition.
 
“The country’s large and increasingly affluent population is looking for highly nutritious foods for all ages. This is fuelling dairy demand growth, which is expected to increase by five per cent every year to 2020.
 
“Our new plant has the capacity to pack around 16,000 MT of dairy ingredients a year – that’s a pack of Anlene, Anmum and Anchor Boneeto every second, or 87,000 packs every day, which will go a long way in helping Fonterra meet this growing demand for dairy.” 
 
Mr Priem said the plant located in Cikarang, West Java is already having a positive impact on the local community. 
 
“We used local partners for the construction and, when running at full capacity, our new site will employ a team of 160 local employees meaning the investment will continue to flow through the local community.
 
“The site also utilises Cikarang’s dry port, allowing us to ensure all of our operations are located in one area. This will help us drive logistical efficiencies,” he said.
 
New Zealand Minister of Local Government, Social Housing and State Services Paula Bennett said this new facility reflects the strength of the relationship between New Zealand and Indonesia. 
 
“On behalf of the New Zealand government, I wish to congratulate Fonterra on today’s official opening – it reflects the increasingly interconnected nature of global value chains, and more closely links our economies together.
 
“Our governments have set a target to grow two-way trade to NZD4 billion by 2024 and dairy continues to be a critical part of this relationship,” Ms Bennett said. 
 
The plant received an A grade rating from regulators during its final stages of testing and commissioning, and has been in commercial operation since June 2015.
 

Farmers can now milk Fonterra for funds

Fonterra farmers can now apply for Fonterra Co-operative Support, a loan to help them deal with the current challenging conditions. 

According to the dairy company, these challenging conditions include the low forecast Farmgate Milk Price for next season, which is currently set at $3.85 kgMS.

This is the first time the Co-op has leveraged its strength to provide support to its farmers at such a significant level, a Fonterra spokesperson noted.

Chairman John Wilson said Fonterra is well placed to help its farmers because of the Co-operative’s underlying strength.

“Being able to help our farmers is all about standing together as a Co-operative and using our collective strength to get through these tough times,” said Mr. Wilson. 
Farmer shareholders can apply for an interest-free loan of 50 cents for every kilogram of share-backed milk solids produced from 1 June to 31 December 2015. The loan will be interest-free until 31 May 2017, after which Fonterra may charge interest.

Farmers can repay all or part of the loan at any time and no security is required over their shares or any other assets. The loan will be repayable directly from milk payments, and automatic repayments will occur when Total Advance Rate Payments exceed $6.00.

Applications open today and close on 25 September 2015. Farmers can apply online (the preferred option) at nzfarmsource.co.nz, or by email, fax or post.
 

 

No tears over spilt milk as Murray Goulburn RTC profits soar

Murray Goulburn Co-operative (MG) today announced financial results for the year ended 30 June 2015.

Overall, MG had a revenue drop of $AUD2.87 billion, down 1.5 per cent compared to last year, which the company said, reflected “product mix optimisation in the face of declining commodity prices.”

With a Net Profit After Tax (NPAT) of $AUD21.2 million, marginally higher than the forecast, the company noted there was “strong growth in the strategic Ready-To-Consume’ (RTC) Dairy Foods business with revenues of $AUD1.13 billion, up 29 per cent on the prior year.

With $AUD500 million in new capital raised and strong operating cash flows, leading to a stronger balance sheet, MG also invested $AUD126 million in strategic capital projects to support growth in the capacity and capability of ready-to-consume dairy foods.

Commenting on the result, MG Managing Director, Gary Helou, said: “We faced difficult external factors with falling commodity prices throughout the year and a strong Australian dollar in the first half of the year, but managed those levers within our control to contain costs, support cashflow and optimise our product mix. 

“MG's strategic drive is focused on building world-leading capabilities to deliver a portfolio of ready-to- consume dairy foods, nutritional products and brands produced in Australia in formats suitable for our growing domestic and international consumer base.

“MG’s strategic shift towards these ready-to-consume dairy foods and value-added dairy products such as nutritionals is already buffering the business against external factors which we cannot control.

“In particular, MG’s Dairy Foods segment enjoyed a stellar year, growing strongly both in the highly competitive Australian domestic market and in key target markets internationally. The segment delivered 29 per cent revenue growth, an outstanding result.

“Our milk intake grew by 5.5 per cent due to a combination of organic growth and new suppliers. Importantly, milk supply grew across most regions, with the exception of the western region, which was down due to unseasonal conditions.”

In MG’s largest Dairy Foods export markets, China and Vietnam, new premium ‘metallic’ Devondale consumer packaging for UHT milk was launched and was well received, particularly in China where it is now helping to secure Devondale’s position among the top three imported milk brands.
Additionally, a range of new consumer and food service products were launched into key export markets including Devondale cream cheese, UHT cream and butter, significantly helping to expand our presence and broaden distribution.

MG said in a statement that it “continues to believe in the solid long-term growth prospects and fundamentals of the dairy industry…and is confident that a global supply response is starting to emerge as a result of the low dairy commodity price environment.”

Cheesy does it: Australian cheese makers perform well despite tough conditions

According to the latest report from IBISWorld, cheese manufacturers Murray Goulburn and Bega Cheese have faced erratic market conditions over the past five years. 

While dairy prices have risen due to growing global demand, Australian cheese consumption has slowed, with consumers increasingly adopting healthier lifestyles. Australian consumers are also favouring quality over quantity, with sales of fresh cheeses increasing over industry staples like cheddar. 

As a result said IBISWorld, cheese manufacturing revenue is expected to decrease by an annualised 0.7% over the five years through 2015-16, to total $AUD5.5 billion. 

This decline has been slowed by cheese exports increasing at an estimated 10.8% annualised over the same period, to total $AUD1.2 billion, due to increased demand from Asia, said the US-based analyst firm.

To combat the rise in dairy prices and support revenue growth, Australia’s two largest cheese manufacturers have taken on different strategies such as global expansion and the pursuit of acquisitions.

Murray Goulburn is one of Australia’s largest cooperative dairy companies. The majority of the company’s revenue comes from manufacturing dairy products, which are sold primarily under the Devondale brand. 

In terms of cheese manufacturing, Murray Goulburn is expected to outperform the industry, with its cheese manufacturing revenue expected to grow by 2.5% in 2015-16 to $AUD1.2 billion. Murray Goulburn’s industry-related revenue has been aided by the rise in dairy prices over the past five years and growth in international demand for dairy products.

More than half of Murray Goulburn’s revenue is generated from exporting processed foods. The company also produces private-label cheeses for major supermarkets such as Coles. 

To meet increased export demand, Murray Goulburn has maintained a steady yearly increase in production volumes by providing its dairy farmers with financial support, bulk purchase of grain and interest-free fodder loans.

The majority of the company’s recent revenue growth has come from global trade and investment in distribution channels. The depreciation of the Australian dollar since late 2013 has also helped Murray Goulburn capitalise on the growing demand for Australian dairy exports.

Bega Cheese produces around 20,000 tonnes of natural cheddar cheese and 50,000 tonnes of value-added cheeses annually said IBISWorld. 

However unlike Murray Goulburn, Bega Cheese does not focus on exports, with about 80% of its production targeted at domestic markets like supermarket chains and other food-service providers. 

In 2007, Bega acquired a large slice of Tatura Milk Industries Limited and in 2008, signed a supply agreement with Kraft Foods Australia. In 2011, Bega Cheese merged with Tatura Milk in an effort to increase efficiency. 

In 2012, the company expanded its Tatura facilities to supply to the Middle East and has since maintained a supply partnership with Fonterra Brands (Australia) Pty Ltd. In the same year, Bega also cut a five-year deal with Coles to provide private-label cheese.

The company’s cheese manufacturing revenue is estimated to grow by 2.8% in 2015-16, to $AUD948.5 million. 

Bega’s business with Tatura Milk, Fonterra and Coles, as well as the company’s long history, has helped it to continue to grow while focusing on the domestic market. IBISWorld anticipates that the alliance with Kraft and outsourcing of marketing to Bonland Dairies Pty Ltd have helped Bega to grow its market share in the cheese manufacturing industry.

Over the next five years, IBISWorld said it expects Australian dairy consumption to grow, dairy prices to stabilise, and exports to increase. 

Product innovation, including functional, gourmet and healthier cheeses will help stimulate consumer demand, while a rise in exports to Asian markets will drive international trade.

Both Murray Goulburn and Bega Cheese are well placed to capitalise on these trends.

New verification technology to be used for food exports

DataTrace technology is set to be used for Australian export food & wine authentication, Security & Safety.

DataDot Technology Limited (DDT) says it is pursuing opportunities in the growing export food and wine authentication market through its newly established joint venture with Beston Pacific Group. 

DDT and Beston subsidiary company, Grape Ensembles (GE), have jointly established Brandlok Brand Protection Solutions, and over the next nine months Brandlok will develop labels and other devices to authenticate and provide information on wine, dairy, seafood, health food and meat products to be exported to China, Southeast Asia, the Americas, Europe and Middle East. 

DDT has granted an exclusive 5-year licence of its DataTrace authentication technology to Brandlok for incorporation into the labels and devices to prove authenticity for these exported products so that customers can track and trace the ingredients from paddock to plate and verify for themselves that the products are safe to eat.

Bruce Rathie, Chairman of DDT, said that the Brandlok joint venture and its arrangement with the new company BGFC focused on food exports to China and other markets represents a significant opportunity to capitalise on major concerns regarding food security, safety and counterfeiting in these emerging export markets.  

“We have seen a number of food and other product counterfeiting issues especially in places like China.”

“This technology is a mixture of labels, barcodes and apps that can be used on mobile devices allowing them to check the authenticity of what they are buying,” he said.

 

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