14 April 2005
New Dairy Exporter Targets Specialist Ingredients Market
Synlait Investments Ltd, one of the country’s largest dairy farming operations, is to become an independent
cow-to-customer dairy exporter from the 2007/8 dairy season, its Board of Directors announced today.
Synlait Chairman Dr John Penno, along with directors Ben Dingle, Juliet Maclean and Hon. Ruth Richardson, advised
Synlait’s current milk processor, Fonterra Co-operative Group Ltd, and the Minister of Agriculture, Hon. Jim Sutton, of
the company’s plans this morning.
Smaller, independent dairy exporters such as Synlait were envisaged by the Government’s Dairy Industry Restructuring Act
2001 which established Fonterra as the dominant player in the industry.
Dr Penno said Synlait, which currently produces more than 40 million litres of milk a year from 8,500 cows on 2,800
hectares of prime Canterbury land, now had the critical mass to begin the next stage of its development which would see
it become New Zealand’s first genuine cow-to-customer dairy export company, focussed on exporting ingredients to the
world’s leading food manufacturers, particularly in the functional foods category, with which it had already established
key relationships.
Dr Penno said the plans would be funded with existing resources and by sourcing equity from selected outside investors.
“From our base, we plan to expand milk production to 100 million litres a year, or approximately one percent of New
Zealand’s total milk production, and to build a state-of-the-art processing facility central to our farming operations.
At least 100 new jobs are expected to be created as these plans unfold, mainly in mid-Canterbury but also in offshore
marketing.”
Dr Penno said Synlait aspired to have the country’s best on-farm management expertise to give it a significant cost
advantage over other farming operations. It would deliver similar cost advantages right through the value chain, through
milk collection and transportation, manufacturing, marketing and logistics. For example, forecast milk transportation
costs were 5c per kg/ms compared with a New Zealand industry average of 20c per kg/ms.
But Dr Penno said the company’s plans were driven by the international marketing gains that its unique cow-to-customer
model would deliver rather than cost savings alone.
“By controlling every element of the value chain, Synlait will be able to breed and manage our herds to produce the milk
characteristics sought by individual customers. We will use that milk to deliver the specialist ingredients demanded by
those individual customers to add value to their products.”
As a smaller player than the industry giants, Synlait would also be able to deliver smaller specialist runs for specific
customer purposes than the global industry giants, Dr Penno said.
“Just as significantly, our unique cow-to-customer model means we will be able to trace and certify the source of our
products back through the production and supply process for customers that request that facility. We are unaware of any
dairy company in the world that will be able to deliver such sophisticated traceability systems as we have planned,” he
said.
Dr Penno said that sourcing equity from selected outside investors would also be a major step for a New Zealand dairy
exporter. He said the raising of capital may or may not be by an offer of securities to the public. He emphasised that
no money was currently being sought for Synlait’s processing and marketing arm and no applications for securities would
be accepted or money received unless the subscriber has received an investment statement, assuming an offer to the
public is subsequently made.
ENDS