Milk-product factory eyes expansion

Despite the earthquakes Meadow Fresh's milk factory has kept its annual revenues "fairly constant" with the only notable dip related to the closure of some shaken outlets including dairies in the eastern suburbs and other quake-hit areas.

"A lot of [the dairies] disappeared, and supermarkets. But we've seen that [consumption] come back," Bryan Rooney, the dairy hub manager for Meadow Fresh's owner Goodman Fielder, says of the difficult commercial environment surrounding the 2010/11 earthquakes.

"We're on budget or slightly ahead of budget, year to date, this year."

In the financial year to June 30, 2012, the company reported revenues of A$411.1 million (NZ$515.7m) in its New Zealand "fresh dairy" operations. This was down 2.7 per cent from A$422.5m in financial 2011 and also down from A$441.1m in 2010.

There was significant overhead cost reduction with the removal of 119 positions as part of the New Zealand restructure, Goodman Fielder noted in its 2012 annual report.

The dairy revenues include those from the Meadow Fresh plants in Christchurch, Palmerston North and a small Puhoi cheese factory north of Auckland.

Rooney says export sales to Asia, the Philippines and the Pacific continue to grow, and expansion of the site is being considered. "We have that much business that we can't keep up. We turn business away."

Asked about expanding the plant, he said new, faster machinery could be installed at the cost of several millions of dollars or through a leasing agreement.

"We're looking at options now. We've got our marketing director, who's responsible for developing a long-term strategy around UHT [ultra- pasteurised] and export milk, it's something seen as a real growth area for us, and in the meantime we're full and run at capacity."

The factory saw relatively little disruption from the 2010/11 earthquakes and minimal structural damage and was able to keep delivering around the South Island despite trying circumstances.

"We were very lucky. We were down for five hours as a maximum time through any of the earthquakes," Rooney says.

The main issue was around the company's on-site water bore which failed, and needed to be repaired to draw water from 60 metres down as a source for cleaning at the plant.

The site has seen giant steps in technological change since it opened in the late 1960s, as consumers have become more sophisticated.

Packaging too has evolved, from the silver-topped glass bottle through to plastic and cardboard carton containers available in retail outlets around the South Island.

A lot of emphasis at the Christchurch factory is on research and development and working in a sophisticated way to get milk from the farm gate to consumers. Meadow Fresh's Christchurch base on the corner of Curletts and Blenheim roads processes about 170 million litres annually including 70 million litres of milk products for Asia, the Philippines and the Pacific.

One recent innovation has been to offer yoghurts containing bits of fruit into a smoother consistency to help sales to young children, given feedback from customers that some young children did not like the bits.

The introduction of these new Meadow Fresh yoghurts has gone really well, Rooney says.

The company had a large research and development team, doing developments around products including milk, cottage cheeses, cream cheeses and yoghurt.

"If you're not innovating, you die in this business," Rooney says.

The efforts on distribution and innovation have seen Meadow Fresh named as a joint winner of a medium/ large producer or manufacturer in the Champion Canterbury 2012 awards.

The origins of the company go back to the co-operative efforts of three farmers, with production starting from a smaller site in Barbadoes St producing milk in bottles as well as cream.

"[Originally] fresh milk supply in Christchurch was horse and cart and billy, and it developed from there.

"Three local farmers basically got together and consolidated, and that's the birth of the co-operative," Rooney says.

Christchurch fresh milk producers including Meadow Fresh and Metropolitan Milk merged to become the Canterbury Dairy Farmers Co-operative. It grew and then saw a series of ownership changes before Goodman Fielder took charge.

During the co-operative years the assets were consolidated at the Curletts Rd site and Meadow Fresh started producing blue-topped homogenised milk, with bottles supplied by AHI Glass. Gradually it made a switch to milk packaged in tetrapaks and plastic bottles as the glass-based production lines were removed.

More than 240 manufacturing and administrative staff work in the site.

"We've got 3 litre, 2 litre, 1 litre, 300ml, 600ml cartons," Rooney says. Meadow Fresh fills 70,000 2-litre plastic bottles a day.

Tetrapaks or gable-top cartons are still produced, he says. Some innovations have not worked, including a "tetratop" with the cardboard carton topped by a plastic lid to reseal.

Meadow Fresh also does contract packaging for other customers, including supermarkets, the Pams and Homebrand brands and for Fonterra's Anchor brand.

Fonterra, which supplies 90 per cent of the raw milk in New Zealand, was the preferred source of milk. "We have a relationship with Fonterra and to be honest we have a good relationship." Fonterra is required to provide milk at market rates under the Dairy Industry Restructuring Act of 2001, which reformed the sector.

It can source from Fonterra sites such as Darfield which handles about 3 million litres a day or Clandeboye which handles 13 million litres a day.

There is a growing market for ultra-pasteurised milk for the Asian, Philippine and Pacific markets.

Pasteurised milk is heated to 60-70 degrees Celsius for about 15 seconds to kill bacteria, then quickly cooled. Ultra-pasteurised long-life milk is treated under vacuum for just four seconds but at the much higher temperature of 140C to kill all bacteria, meaning the milk has a packaged shelf life of nine months before it is opened.

Goodman Fielder's export expansion plans could see the ultra-pasteurised plant increase production from 6000 litre packs per hour to 15,000 litre packs an hour.

One process that has caused consternation, at least across the Tasman, is the use of permeate in the production of milk. Permeate is a high- lactose milk byproduct of a filtration process where calci- trim milk has some of the liquid extracted to concentrate the calcium. "The byproduct of that is this milk-water and that's permeate," Rooney says.

Processors such as Meadow Fresh pour permeate back into some of its milk to standardise protein levels, particularly for blue-top or homogenised milk, where the fat stays spread through the milk.

While financially advantageous, there should be no concern about the permeate practice. It merely adds one milk product derived from cows to other milk, Rooney says.

The use of permeate also helped bring the protein into a targeted range as specified for that product, he said.

"Our competitors who choose to make a lot of airplay about permeate, do so because they don't have it.

"They don't have the filtration technology that enables [us] to make the high solids product."

The Press