Dairy Crest, Fayrefield and Fonterra in venture

Dairy Crest of the UK has entered into a strategic partnership with New Zealand dairy giant Fonterra. Fonterra will market and sell two products for the fast growing global infant formula market. (Pictured, from L to R: John Beech, finance director of Fayrefield Foods; Theo Spierings, CEO, Fonterra; and Mark Allen, CEO of Dairy Crest)

Dairy Crest had previously announced a £45 million (€56.5m) investment to manufacture demineralised whey powder. This is the base ingredient in infant formula and will be produced from the whey generated at its cheese making factory at Davidstow in Cornwall. Fonterra will receive a commission to sell all of Dairy Crest’s demineralised whey production and will also provide technical and engineering support. The agreement is for a minimum of five years. 

Dairy Crest is also announcing a new £20 million (€25.1m) capital investment at its Davidstow site to manufacture galacto-oligosaccharide (GOS). GOS is a lactose-based prebiotic, widely used in infant formula. Dairy Crest will enter into a joint venture to produce GOS with UK-based Fayrefield Foods Limited, which will provide access to the necessary enzyme and other intellectual property.  Fonterra will supply lactose and will also take responsibility for marketing and selling this product.  This project is anticipated to provide an eight year cash payback for Dairy Crest.

The £45 million capital investment in demineralised whey powder is already well underway and on track, with commercial production expected to begin early in 2015/16.  Production of GOS is expected to commence later that year. 

Mark Allen, Dairy Crest chief executive, notes, “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.” 

Fonterra chief executive Theo Spierings says,  “Dairy Crest possesses proven technical expertise, a quality culture and an excellent source of high-quality whey.”

The announcement has been welcomed by the UK government. “It’s great to see an exciting development like this, which adds value, supports local talent and promotes British dairy products both at home and abroad,” says Owen Paterson, secretary of state at Defra. “The global market is where the big opportunities lie – dairy product exports increased by more than 39% 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.”