On 30 November 2015, Fonterra Australia and Bellamy’s Australia Limited (Bellamy’s Organic) announced plans to enter into a long-term strategic partnership to manufacture new baby nutritional powders.
The five-year, multi-million-dollar strategic agreement is part of Fonterra’s transformation of its Australian business, said Fonterra managing director for Oceania Judith Swales, on announcing the proposed partnership.
“This is our strategy in action for Australia, where we focus on the areas we can win in a highly competitive market to deliver the best returns,” Swales said.
What’s in it for Fonterra Australia?
The Darnum Park facility in West Gippsland, Victoria, is a leading nutritionals plant in Fonterra’s global network, producing whole, skim and specialty nutritional milk powders for domestic and export markets. The site, which opened in September 1997, runs 24-7, 365 days a year.
The New Zealand-based cooperative recently invested $45+ million upgrading the Darnum facility to boost its nutritional products output, and is keen to get the best possible return on its investment.
“We are actively growing our nutritionals business through strategic partnerships and agreements which will see the Darnum nutritionals plant move towards full capacity,” Swales said.
“Our Australian business has particular ingredients strengths in cheese, whey and nutritionals…and today’s announcement with Bellamy’s Australia – one of the fastest growing infant formula companies – reaffirms our strength in nutritionals.”
Fonterra plans to implement innovative technology developed by the cooperative’s New Zealand R&D centre to ramp up production of infant formula at its Darnum facility, said Swales.
“The Darnum plant is a leading nutritionals plant in Fonterra’s global network,” she noted. “Leveraging our Fonterra Research and Development Centre in Palmerston North, the largest dairy innovation centre in the Southern Hemisphere, we will bring innovation to the Darnum plant and the nutritionals market to capture growing demand.”
What’s in it for Fonterra?
Australia is Fonterra’s biggest ‘milk pool’ outside New Zealand and is vital to its vision of “being a globally relevant Co-op”, states the company's website.
The long-established trans-Tasman dairy cooperative has a solid reputation for producing safe, secure, high-quality milk, and sees the Australian dairy industry as “poised for growth”, with Fonterra ideally positioned to capitalise on this growth and “win in the Australian market”.
The Australian arm of Fonterra’s business, states the company website, is “focusing on areas where we know we can win – an optimal product mix, leveraging the Co-op’s global multi-hub strategy and global sales network, expanding our foodservice business, growing our market-leading brands and growing our nutritionals business”.
The cooperative had “a clear plan to return its Australian business to strong and sustainable profitability”, Swales said.
To that end, Fonterra is also close to finalising a joint venture between its Darnum plant and the Hangzhou, China-based Beingmate Baby and Child Food Company Ltd following approval by Beingmate’s Board and shareholders recently.
Learn more about why Australia will play a critical role in Fonterra’s future success and how the Co-op plans to utilise its Aussie operations in coming years in the video below.
What’s in it for Bellamy’s?
Bellamy’s current challenge is producing enough of its premium-grade infant formula to keep up with unprecedented demand from Asian markets, notably China.
The company has experienced consistent growth over several years and has a strong presence in the organic ingredients supply chain. Infant formula makes up about 88 percent of Bellamy’s sales, and demand for its principal product is booming: in FY 2014-15, the company’s revenue grew by an extraordinary 156 percent on that of the previous financial year.
The proposed strategic partnership with Fonterra will provide a timely production boost, enabling Bellamy’s to meet its domestic commitments while keeping abreast of burgeoning demand for safe, premium-grade infant formula across Asia, particularly China, and fostering the continued growth of the company.
“The proposed multi-million-dollar strategic agreement will help support the growth of Bellamy’s Organic in Australia and abroad, and builds on our strong current relationship,” said Swales.
Fonterra and Bellamy’s hope to finalise arrangements by the end of 2015, with the agreement starting in 2016.