Fonterra to restructure organics operations

The world’s largest milk producer, Fonterra, has today announced it will be restructuring its organics operations, following flow-on effects of the global financial crisis (GFC).

Fonterra is meeting with its organic famers this week to take them through a four point plan to improve the business from, currently producing losses, and help them break even.

Fonterra employs 16,000 staff working in various places across the dairy spectrum from advising farmers on sustainable farming and milk production, to ensuring quality standards in more than 100 markets around the world.

It is a global supplier of dairy ingredients to many of the world’s leading food companies and has its own consumer dairy brands in Australia/New Zealand, Asia/Africa, Middle East and Latin America.

The farmer-owned New Zealand co-operative is the largest processor of milk in the world, producing more than two million tonnes of dairy ingredients, value added dairy ingredients, specialty ingredients and consumer products every year.

It is one of the largest investors in dairy based research and innovation around the world.

Fonterra has outlined its four step plan in a statement today, which are:

• Concentrating Fonterra’s North Island organic suppliers in one hub around its key certified organic processing site – Hautapu. This will reduce the number of Fonterra’s organic suppliers.
• Reducing the amount of product processed at Fonterra’s other two certified organic sites – Waitoa and Morrinsville.
• Prioritising the organic product range to focus on cheese which provides the best returns.
• Focusing on emerging Asian and Australasian organics markets where there are stronger returns and growth potential.

“In order to stay in organics, we have to recognise that the global market for organics has changed. This four point plan is designed to bring our organics business out of loss,”
Fonterra’s Group Director Supplier and External Relations Kelvin Wickham said.

He says the co-operative remains committed to the organics market but as growth in this market has significantly slowed since the global financial crisis, Fonterra needs to make changes to its organic operations.

He says the first two points will mean considerable transport and manufacturing cost savings for Fonterra’s organic business.

“Our organic farmers are currently spread right across the North Island. This means substantial transport costs for the business.

“In addition, focusing most of our organic product through a single site will mean we are able to create efficiencies of scale in processing the milk.

“We understand the big commitment many of our farmers have made to the organics programme and that this transition will not be an easy one to make.

“The decision to reduce our organics operation was not taken lightly but we need to get the business back into a break-even situation.

“We will honour all of our organic contracts through to their formal termination dates, which in some cases are four-five years away and we will work with our farmers as they make the transition out of the organics programme.”

Wickham says the impact of the GFC scientifically damaged the organics market and market indications are it will not recover to previous levels.

“All categories felt the effects but particularly the category in which we sell – packaged dairy foods – where prices and volumes are still below 2008 levels,” he said.

“Research shows people are now less willing to pay the premium for organic products.

“In addition, consumers are gaining more confidence that everyday products are being produced more sustainably and are more acceptable so they no longer see the need to pay the premium for most organic products.”

Image: Farm Land Grab



Scottish food company fined £100 000 for forklift death

A Scotland food firm has been fined £100 000 after a worker was run over and killed by a forklift truck at a factory in West Lothian.

Vion Food pleaded guilty to breaking the Health and Safety at Work Act over the death of 60-year-old George Hardie two years ago after he was hit by a badly loaded forklift truck, the BBC reports.

The Health and Safety Executive (HSE) found the driver had been carrying two large crates that obscured his view.

Hardie, from Livingston, was walking across a yard on 2 June 2009 to drop paperwork off at another part of the Broxburn site when a colleague driving a forklift carrying two large empty containers across the yard to be washed hit him.

The containers were stacked on top of each other on the front of the forklift, with the top of the load approximately 160cm off the ground, meaning it was difficult hard for the driver to see over them.

As the driver approached the container wash, he felt his truck go over something and when he stopped and got out he saw Hardie lying on his back.

Hardie was taken to the Edinburgh Royal Infirmary, but was dead on arrival.

An HSE investigation found Vion Food Group subsidiary Vion Food Scotland had not properly assessed the risks of moving the containers around the yard or made arrangements to make sure the containers were moved safely.

It also found the company did not have a safe traffic management system or adequate supervision in place to keep pedestrians away from vehicles.

Price wars damaging Aussie food production: expert

An expert on food production has told a national conference Australian food processors will not be able to compete with major food retailers.

Speaking at the Crawford Fund Annual Conference at Parliament House in Canberra, Dr David McKinna said the margins of Australian food processors is not enough to support reinvestment required to be able to compete on a global stage.

McKinna, a market trend analyst, said the current dire situation in Australian will continue.

“The tension between major supermarkets is driving massive restructuring of the agrifood supply chain,” he said.

“The turning point in the power shift has been the dramatic weakening of producer brand power.

“Food processors have been wounded by competition from private labels, the inability to reinvest in innovation and branding and being forced to de-engineer products to meet price points.

“Without doubt, global food companies must all be considering closing Australian processing facilities.”

His comments come as Australian factories close their operations at a rapid pace, including the Heinz relocation to New Zealand and the closure of SPC Amatil’s tomato and fruit processing factory in Victoria.

Image: The ABC

14% fall in profits for Nestle

Nestle has reported a fall of almost 14 per cent in first half net profit.

The world’s biggest food company had a net profit of 4.7 billion francs ($AU6.2 billion) in the last half, which has been blamed on the impact of the strong Swiss franc.

Sales were down almost 13 per cent per cent to 41 billion francs for the six months ending June, as the foreign exchange rate had a negative impact of 13.8 per cent.

Nestle chief executive Paul Bulcke said operating is becoming "extremely tough, volatile and competitive," due to economic instability, rising raw material prices and the strength of the Swiss currency.

There was some success for the company, however, Bulcke said.

“We managed to drive growth not only in emerging markets but also in developed countries, especially in Europe," he said.

Europe contributed 7.5 billion francs in sales, 4.1 per cent more compared to the same period one year earlier.

Ice cream has been the most popular item from Nestle in the region.
The company also said France, Italy and Greece all showed growth and demand as did Ukraine and the Adriatic region.

The biggest market for the company, North America, continued its success, with sales up 5.6 per cent off the back of a high demand for pizza.

Coca-Cola reports $234.1m profit in first half

Coca-Cola Amatil has recorded $234.1 million in profits in its half yearly report.

In the period ending 1 July 2011, the company experienced a 5.5 per cent increase on the same period the previous year.

CCA Group Managing Director Terry Davis said the company has bounced back from a slump in the 2010 financial year.

“I believe that the operating performance in the first half has been solid given the business has had to manage external headwinds, as well as the cycling of a very strong first half result in 2010,” he said.

“The combination of devastating natural disasters in Australia and New Zealand, rapid increases in resin costs and the impact of translation on offshore earnings from the stronger Australian dollar reduced our net profit growth by around 5% for the half.

“The successful execution of our infrastructure programs in expanding manufacturing capacity and improving operational efficiency has again delivered a reduction in operating costs and further improvements in our customer servicing capability.”

In Australia, CCA has seen an increase of 3 per cent for the half year, reporting profits of $281 million.

The natural disaster crises in Australia including Cyclone Yasi and the Queensland floods during the period damaged profit increase in the period, as did the reduced consumer spending environment.

There was no growth reported in the New Zealand business but Indonesia saw a strong increase.

The alcohol food and services section of the company experienced an earnings growth of 1.7 per cent in the half year.

The strong Australian dollar has impacted competitiveness for the company who are up against cheap imported brands and private label categories.

Premium beer has continued to perform well for the company, particularly with the success of the Bluetongue brewer opening in New South Wales last year.


Japan’s Asahi buys Independent Liquor NZ

The Independent Liquor of New Zealand has been bought by Japan’s Asahi Group Holdings for $AU1.22 billion.

The purchase is part of the Japanese company’s expansion in Asia and Oceania, according to a report.

Japanese companies are seizing the opportunity to invest overseas, as the Yen continues to rise and domestic sales plummet as a result of the country’s shrinkage and ageing population.

Asahi is best known for its “Super Dry” beer and according to a local newspaper, will announce the New Zealand deal, its biggest acquisition, shortly.

In 2009, Asahi also acquired Schweppes and in July this year, entered into a binding share purchase agreement to buy 100 per cent of shares of mineral water and juice maker P&N Beverages Australia.


US students develop cookie-making robot

In a development that could dramatically change the food manufacturing industry, or even just humble kitchens, students in the US have taught a robot how to bake cookies from scratch.

The robot looks the part in a chef’s hat, and can identify cooking utensils and ingredients on its own.

Graduate student Mario Bollinio has been teaching the robot to bake, while Jenny Barry and a team of undergraduate students have been focusing on the equally important task of cleaning up after itself.

Watch a video of the robot in action here.

Salmonella contamination: 36 million pounds of turkey recalled in US

In one of the largest product recalls in history, US food giant Cargill has recalled more than 36 million pounds of fresh and frozen ground turkey because of a possible salmonella contamination.

One man has been killed by the strain of salmonella, and 79 others have taken ill.

Food advocates in the US are calling for changes to mean recall rules after it took regulators months to warn the public about the salmonella threat.

A government agency that tracks antibiotic-resistant pathogens found evidence of the contamination in Cargill ground turkey in early March, but it took five months for the recall to be announced.

On Friday the company admitted that Salmonella Heidelberg was detected at the Springdale plant even earlier than the March discovery.

Image: Bloomberg

Cloned cow produces human milk

Posted by Rita Mu

Argentinean scientists have created the first transgenic cow that produces human milk.

The cloned cow, named Rosita ISA, was made using human genes that contain the proteins present in mothers’ milk.

Scientists at Argentina’s National Institute of Agrobusiness and National University of San Martin added two human genes: the protein lactoferrin, which provides infants with antibacterial and antiviral protection; and the antibacterial agent, lysozyme.

Rosita was born on 6 May.


Fonterra to complete purchase of Brazilian dairy farm

Posted by Rita Mu

New Zealand-based dairy company, Fonterra, is in its final stages of completing the purchase of an 850-hectare farm in the mid-west of Goias State in Brazil.

The company has signed a conditional sale and purchase agreement for the farm, which is expected to feature a pilot dairy facility with two milking platforms with a herd of 3,300 cows.

Chief Executive Andrew Ferrier said Fonterra’s investment in the farm would be the first step in developing a source of fresh milk in Brazil to support Dairy Partners Americas (DPA), Fonterra’s South American joint venture with Nestlé.

“We have already invested through DPA in helping to improve the efficiency of dairy farming in Brazil,” Ferrier said. “This pilot project will allow us to develop and test the right model for our own dairy farming operation.”

“Brazil is Latin America’s largest economy, with 200 million people. The growing and increasingly prosperous population is driving strong demand for fresh dairy products. This demand will be met by milk produced locally.”

According to Ferrier, global demand for dairy products is forecast to rise steadily.

“Demand for dairy around the world is growing by 2 per cent per annum,” Ferrier said.

“New Zealand milk will always be our top priority. While New Zealand milk production is forecast to grow at a long term average of two to three per cent – we are looking offshore to supplement this and ensure we meet the growth potential for dairy globally.

 “Developing sustainable, high quality milk supply for key customers in rapidly developing economies such as Brazil and China is a powerful way of achieving our strategy of being the natural source of dairy nutrition for everybody, everywhere, every day.

“We are sourcing more milk overseas – 6.6 billion litres last year, or around 31 per cent of our total.  Our international farming operations are in line with this strategy of complementing New Zealand milk.”

In addition to the Brazilian dairy farm, Fonterra is conducting a feasibility study into a potential large-scale joint venture dairy farm in India.

In 2007, Fonterra established a Tangshan Fonterra Farm in China, which consisted of 6000 cows. Last year, the company announced plans to develop a second farm in Yutian County.

The company is expecting the sale of the Brazilian farm to be completed next month.


Beer PET bottles to reach 7.7 billion by 2015: Study

Posted by Rita Mu

Global PET beer bottle consumption is forecast to grow at a Compound Annual Growth Rate (CAGR) of 5.3 per cent to reach 7.7 billion bottles by 2015, according to a new study by market research group Pira International.

The Future of Beer in PET Packaging study, conducted for beer brewers, packaging manufactures and suppliers, provides quantitative market sizes segmented by barrier technology, bottle size, region and country. The study also provides technology and market forecasts to 2015.

One of the main drivers for the increased use of PET bottles for packaging beer will be market penetration into areas not suitable for glass, according to the study.

While Central and Eastern Europe are currently the dominant markets for PET beer bottles, the study also shows good growth for beer in PET bottles going forward, but at rates lower than the 2003-08 pre-recession era. This is a result of higher taxes on beer in Russia and Ukraine, according to the study.

PET beer bottle consumption in Western Europe, North America and South and Central America, is forecast to grow as well in the next five years until 201, but at a relatively low rate.

In Asia-Pacific, China will lead demand for beer in PET bottles.

"PET is showing increased demand from a number of different categories including juices and nectars, ready-to-drink (RTD) teas, functional drinks, flavoured waters and beer. PET bottles are convenient, practical, lightweight and unbreakable," Head of Editorial at Pira, Adam Page, said.

"However many brand owners remain reticent when it comes to using PET packaging for beer. Despite not taking off on a large scale in many traditional beer-drinking countries, there is still a huge amount of interest in the potential for beer in PET due to the perceived advantages. New technologies are helping challenge some negative perceptions and create opportunities for brewers, brand owners, packaging converters and suppliers."


Kraft Foods opens chocolate facility in Brazil

Posted by Rita Mu

Kraft Foods has opened a new $80 million manufacturing facility in Pernambuco, Brazil.

The 270,000-square-foot plant will initially produce chocolate and powdered beverages. A biscuit line will be added in 2012.

The facility will employ more than 600 employees and eventually grow to 800 when the new biscuit line opens in 2012.

"With the opening of our new plant in Pernambuco, we’re providing jobs to local Brazilians, investing in our communities and meeting the needs of our consumers in this important, fast-growing region," said Marcos Grasso, President of Kraft Foods Brazil.

The new facility will boast prismatic skylights, solar lighting and water heating, a wastewater treatment plant, low-emission equipment and eco-paved parking lots. The new facility is also seeking to be recognised by Leadership in Energy and Environmental Design, an internationally recognised green building certification system.

The Pernambuco facility will be Kraft’s first certified plant in a developing market.

"Each small step adds up to a big difference," Grasso said. "These innovations are not only green, they also keep manufacturing costs down.”

Combining the new plant and other planned manufacturing expansions, the company will invest about $200 million in Brazil over a two-year period – the largest investment in the market in more than a decade.

"Brazil is one of 10 priority developing markets where we’re making big bets," said Sanjay Khosla, President, Kraft Foods Developing Markets.

“Today, we’re among the fastest growing consumer goods companies in markets like Brazil, India and China. We’re excited to build on what’s working by making our biggest investment in Brazil in more than 10 years!"