Synlait Milk is adding an infant milk formula plant on its
Mid-Canterbury site to target the growing Chinese market.
The company, which started processing milk at its factory at
Dunsandel in 2008, converts more than 300 million litres of
milk a year into a variety of milk powder products and
functional ingredients for export to functional food
manufacturers.
Chief executive Dr John Penno, named Federated Farmers
Agribusiness Person of the Year in 2009, was guest speaker at
the Lower Waitaki River Management Society's recent annual
meeting at Waitaki Bridge.
Dr Penno said it was the activity of the big population of
Asia that was really starting to drive what was happening in
New Zealand.
China, which was home to 60 million children under the age of
4, was New Zealand's most important market. Shanghai was a
city with the population of Australia and, within five years,
would have a higher GDP per capita than New Zealand. It was
changing very quickly.
Each of those 60 million infants had six adults looking after
it, their parents and both sets of grandparents, and there
was an "enormous" concentration of income going into looking
after those children and "giving them the very best".
"Traditionally, they don't use a lot of milk in their diets
but they're figuring out for young kids, milk is a very good
thing to give them, and it's ... driving what they buy in the
supermarket and how much they're prepared to spend," Dr Penno
said.
Tins of "top shelf" infant milk formula were selling in China
for $NZ100 each, while the product Synlait was about to
launch with a partner would sell for about $80. The milk was
being bought by people who did not spend a lot on living
expenses, yet were prepared to spend that on their children.
Things such as this set the dairy industry apart from the
sheep industry.
"It's not about industry structures, it's not about that the
sheep industry's dumb and the dairy industry's smart or that
the meat companies are dumb and the dairy industry companies
are brilliant. It's simply about the product and the value of
that product in the global market." T
here was no tariff to get the products to China - "they want
our products and they're encouraging them in" - and while it
cost $US200 a tonne for Synlait to get its products from New
Zealand into Europe, it was less than $US50 to get them out
of Lyttelton and into Shanghai.
The Chinese were interested that there was pure water and a
clean environment in New Zealand. Water was the "number one"
and most important resource in Canterbury. Dairy farmers were
one of the biggest users of the resource and there was some
"deep feeling" about that in the community, which Dr Penno
said he could understand.
Over the last 10 years, a dairy industry the size of Taranaki
had been laid out across Canterbury and caused a huge amount
of change with which everyone was grappling.
Synlait was possibly the first dairy company to introduce
financial penalties for any suppliers breaching resource
consents, and farmers had been "chucked out" of the supplier
base for not having high enough environmental standards.
"Big sticks" needed to be there for those that did not have
high enough standards. Those sticks were betting "bigger and
bigger" and that was appropriate.
Asked whether Synlait planned to buy rival dairy company New
Zealand Dairies, which has a plant at Studholme, Dr Penno
said he would "categorically" state it would not buy the
firm.
Asked about dairy prices, Dr Penno said farmers needed to be
extremely cautious about the next six months. The high dollar
was likely to stay high and commodity prices had been sliding
for six months.
- sally.rae@odt.co.nz
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