Dairy Crest seals infant formula deal

By Nicholas Robinson

- Last updated on GMT

Dairy Crest's announcement is good news to analysts
Dairy Crest's announcement is good news to analysts

Related tags Dairy crest Milk

Dairy Crest’s confirmed strategic partnership with the infant formula company Fonterra yesterday (July 3), as well as an announced £20M investment in its Davidstow site to manufacture lactose-based prebiotics, is “good news” to analysts.  

The deal with New Zealand-based Fonterra was an “important strategic initiative”​, said Shore Capital analysts Clive Black and Darren Shirley.

Black and Shirley, who harbour concerns about Dairy Crest’s household delivered milk operations, as well as the spreads market, in which Dairy Crest is a leading player, said the deal would add value to the company’s cheese production.

Fast growing market

Under the deal, Fonterra will market and sell two products for the fast growing global infant formula market, said Dairy Crest.

The deal has followed the company’s previously announced £45M investment to manufacture demineralised whey powder, which is the base ingredient for infant formula.

Whey will come from the company’s Davidstow cheese making factory in Cornwall, which will receive a £20M investment to manufacture galacto-oligosaccharide (GOS) – a lactose-based prebiotic widely used in infant formula.

Production of GOS is expected to start in late 2015, while the investment in Dairy Crest’s demineralised whey powder is already underway and is expected to yield results at the same time.

GOS will be produced in a joint venture between Dairy Crest and UK-based dairy company Fayrefield Foods, which will supply the necessary enzyme as well as the knowledge for its effective use.

‘Important strategy’

Mark Allen, Dairy Crest chief executive, said: “Demineralised whey powder and GOS form an important part of Dairy Crest’s strategy to grow added value sales.

“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.”

Owen Paterson, environment secretary, said the news supported local talent and promoted British dairy products both at home and abroad.

“The global market is where the big opportunities lie,” ​said Paterson.

“Dairy product exports increased by more than 93% since 2009, reaching £1.3bn in 2013. This is a superb achievement and I’m delighted that innovative companies like Dairy Crest are seeking to build on that.”

Meanwhile, Dairy Crest Severnside site director Richard Wood told Food Manufacture ​about the company’s investment plans for his site in the July issue. Subscribe​ to find out more.

Related topics Dairy Dairy-based ingredients

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