Dairy Crest announces expansion deals

The British dairy producer has announced a partnership and a joint venture deal to develop its product lines.

Dairy Crest, the British dairy producer, has announced two deals that will further develop and expand its operations.

The first deal is an export deal with Fonterra, the world’s largest dairy exporter, to export demineralised whey powder, one of Dairy Crest’s new products. In addition to export services, Fonterra will provide technical and engineering services in a five-year agreement, Dairy Crest said in a press release.

The whey powder, which was developed with an investment of £45 million ($77 million; €56 million) will be produced with whey generated from Dairy Crest’s cheese factory in Cornwall.

The company also announced a joint venture with UK based Fayrefield Foods Ltd to manufacture galacto-oligosaccharide (GOS), which is a lactose-based prebiotic widely used in infant formula.

The new product and joint venture will see £20 million-worth of investment from Dairy Crest, with Fayrefield Foods supplying access to the required intellectual property. Fonterra will supply lactose and will also take responsibility for marketing and selling GOS.

Dairy Crest anticipates the GOS project will provide an eight-year cash payback for the company.

Chief executive Mark Allen explained that the projects were part of Dairy Crest’s strategy to produce more complex products. “Demineralised whey powder and GOS form an important part of Dairy Crest’s strategy to grow added value sales,” he said.

“We are excited to be working with Fonterra and Fayrefield Foods to bring these two innovative new products to market. These partnerships, with leading experts in the field, give us exposure to global growth opportunities.”

Commercial production of the demineralised whey powder is expected to begin in early 2015. Production of GOS is expected later that year.

Dairy has seen a lot of investment recently, with a range of financing including direct investment and IPOs such as the one announced by Shengmu Organic Milk.

The UK government has emphasised the importance of the rising global demand for dairy products. “The global market is where the big opportunities lie – dairy product exports increased by more than 39 per cent since 2009 reaching £1.3bn in 2013,” said Owen Paterson, Secretary of State for Environment, Food and Rural Affairs.

“This is a superb achievement and I’m delighted that innovative companies like Dairy Crest are seeking to build on that,” he added.