A decade ago, Southland businessman Keith Neylon did not know
the first thing about sheep's milk.
Now his company, Blue River Dairy, milks more than 10,000
ewes daily; runs a factory turning out butter, five cheese
varieties, ice cream and milk powder; exports products to
seven countries; and has just launched sheep's milk infant
formula on the New Zealand and Chinese markets.
Reporter Allison Rudd spoke to the agricultural innovator.
Keith Neylon nurses a cup of coffee in the cafe and tasting
room at the Blue River Dairy factory, formerly the
Invercargill town milk supply plant. He's in the middle of an
interview, but he still has his eye on his customers.
He spends a few minutes discussing the merits of sheep's milk
butter with a man who turns out to be a chef who has heard
about the butter in a magazine and is keen to try it.
Soon after he is offering sheep's milk butter on a cracker to
a slightly bemused Asian tourist.
''You'll like this,'' he says.
''Very good butter.''
The tourist obligingly eats the butter and cracker and comes
back for more.
Sheep's milk has become big business for Mr Neylon, although
he deflects questions about capital investment, turnover,
market volumes or export earnings as commercially sensitive.
What he will say is that Blue River is doing nicely these
days - reward for the millions of dollars he and others,
including a wealthy Indonesian friend, have invested.
He calls Blue River a ''vertically integrated'' operation. It
owns and runs three farms in Southland, breeds its own
high-yielding ewes, refined its milking machines, set up its
factory, developed its products and does its own marketing.
Blue River is the hardest ''sunrise industry'' project he has
ever been involved with, he says.
A qualified pilot since the age of 16, Mr Neylon was involved
with deer farming and live-deer recovery before moving on to
mussel and salmon farming and dabbling in kiwifruit and
His introduction to sheep's milk was inauspicious. He was
asked by PPCS (now Silver Ferns Farms) boss Robbie Burnside
if he was interested in doing something with sheep's milk -
already widely used in European and Mediterranean countries.
Soon after, he and his Air New Zealand pilot son visited
small producer Les Donald at Edendale.
Mr Neylon says he shunned the offer of a cup of tea with
''That was the last thing I wanted to taste. I'd had to shear
enough of the bloody things to earn money to become a pilot,
so sheep and I didn't really mix.
''Then Mrs Donald bought out a two-litre ice cream container
of sheep's milk cheese - yellow, pus-y-looking stuff - and I
thought: `There's no way in hell I'm eating that'.
''She put in the knife and out came a perfectly shaped wedge
of feta cheese. My son couldn't stop eating it.''
Mr Neylon wasn't convinced until he took a container of milk
to Zookeeper's cafe in Invercargill.
''Paul Clark used it in a latte, a flat white and a
cappuccino. I sat down to drink it and bang, it was the
Spanish Steps in Rome and a little coffee shop in Paris and
the best coffees in the world I had ever tasted.
''I realised it was the sheep's milk. It was so creamy, so
nice. The very next day I went back to Robbie and said I
would have a crack.''
Mr Neylon worked initially with former Invermay director Dr
Jock Allison to develop a high-yield ewe based on the East
Friesian dairy breed imported from Germany, before developing
his own composite.
Production of cheese began out of Balclutha before the move
to the Invercargill factory and product diversification about
six years ago.
But he says the company wasn't formed on a whim and its
success is not an accident.
''We had a plan before we started. We looked at what was
happening in the industry worldwide and applied it to New
Apart from some exporting assistance from the Ministry for
Primary Industries, Blue River has achieved its success on
its own, he says.
''We've had no industry support at all because we don't fit
the traditional meat and wool sheep farming model.''
While he says New Zealand promotes itself as an innovator
with a venture capital market, he does not believe that is
true in the rural sector.
''I have been involved in four sunrise industries ... and the
reality is the trip's been exactly the same. It's innovation
that gets us home, but you can directly point to the system
and ask: `What chance have we got to get major developments
''No-one wants to know, until the time something is proven
and becomes low-risk. Then everyone is quick to say: 'Me
Last year, Mr Neylon presented a briefing paper on the sheep
milk industry to Parliament's primary production committee.
In it, he said an expansion into sheep milk production could
be a game-changer for sheep farmers in the grip of depressed
returns for meat and wool.
He highlighted the economic benefits of sheep's milk: it
sells for about four times the price of cow's milk, has a
higher solids content which enables twice the amount of
cheese to be made from each litre of milk, has superior
freezing and drying qualities, and has much smaller fat
globules than cow's milk, making it easier to digest.
He promoted its huge potential as a bulk milk powder for the
food, infant formula, pharmaceuticals and cosmetics
industries, as well as the useful economic sideline for
farmers from selling lambs.
Blue River's growth and expanding export markets could be a
model for the industry's development, he said in the report,
stating he hoped to see the industry build to at least two
million milking ewes in the next 10 years.
So far, nothing in the report has been progressed, and that
doesn't surprise him.
Then there is sheep farmers' reluctance to change.
''Farmers are hardwired in to the meat and wool model. Show
me one sheep farmer who's prepared to say: 'I'll try and do
this differently'. Where's his sense of adventure?''.
Mr Neylon has not lost his sense of adventure. Blue River
will soon advertise for outside suppliers and will provide
them with stock and help them build milking platforms.
He has targets in mind for the number of suppliers he wants
on board in the next five years but says the information is
The company has also just branched out in a new direction
with the launch of infant milk formula in New Zealand and
Even though production will be small initially - about 1000
tonnes annually - Mr Neylon says the tonnage will make Blue
River the largest producer of sheep's milk infant milk
formula in the world.
It will be made in Invercargill but Mr Neylon has spent much
time in China recently liaising with potential retailers.
He says Fonterra's cow's milk infant formula problems were at
the back of everyone's minds, but he found excellent support
for his product.
''How have we done it? By forming relationships and talking.
It's all about promotion. Infant formula is a very personal
thing to mothers ... they have to know it is safe.
''But in China you also have to get the grandparents on board
too, as many mothers work and it is grandmothers who look
after the babies. They have to be 100% comfortable that what
they're putting down their treasures' throats is safe and
very good for them.''