Kiwis buy EU milk to expand brands
By Simon Wragg
NEW Zealanders are looking to buy more EU milk to develop brands across the continent.
While the extra demand could initially improve the price paid to UK producers, they stand to lose out in the long term.
Supplies will be used to develop Kiwi-branded products, some of which already compete strongly against UK-labelled goods.
Once trade barriers are eroded, NZ milk could be used instead.
The board is already expanding its Anchor butter operation at Swindon using NZ milk destined mainly for UK outlets. But it is also looking to build its cheese and aerosol cream ventures using EU supplies.
These growth areas are being pursued following a fall in the yellow fats market and changes in retail demand.
Warren Larsen, NZDB chief executive, told last weeks London briefing that the board should also buy constituents from dairy processors.
It has set itself the target of increasing sales and return on assets both by 15% and a 4% lift in productivity each year until 2005. If achieved, that will double the businesss size over that period.
It will have to face up to intense competition, Mr Fraser admitted.
Despite accounting for a third of the worlds dairy trade, NZ producers would have to overcome consolidation of producers and dairies in the EU and US, a price squeeze by retailers and pressure on its traditional co-op structure.
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At home, rationalisation had already seen just seven co-ops survive (down from 30 groups 20 years ago) with just two accounting for 90% of producers.
Mergers had helped cut manufacturing costs by 3% annually for the past five years. Having done that we dont see further rationalisation yielding extra benefit in terms of efficiency, said Mr Fraser.
Co-ops must be able to develop value-added businesses; if not, I despair for their future. Weve partly addressed these pressures by forming strategic alliances with Bonlac Foods of Australia and Dairy Farmers of America.
“Farmer-owned businesses need to make these links to continue to thrive, he said.