Lessons in dairy innovation from New Zealand

Falling world dairy prices coupled with imminent major production increases as a result of the ending of the EU milk quota regime present a variety of challenges for both Irish dairy farmers and processers. Teagasc Food Research is assisting the sector to meet these challenges and recently hosted a dairy process Innovation event at its Moorepark Research Centre as part of its Gateways to Food Innovation series.

The day focussed specifically on current and next generation dairy processing and technology utilised by the dairy and infant formula industry. The event was a showcase for new food technologies and highlighted the research and development activities of both Teagasc and University College Cork as well as other expertise and services available to the sector.

The event included presentations from five speakers from a variety of backgrounds; Chris Bloore, a dairy industries systems consultant from New Zealand; Mark Faherty, economist and dairy market analyst with the Irish Dairy Board; Mary Nyhan of Nyhan Tax Advisors; Richard Fernandes of Luxcel Biosciences; and Tom Mulqueen of DACAER Consulting.

Chris Bloore gave a very timely presentation on the steps taken by the milk processing industry in New Zealand during times of an expanding milk pool. According to Bloore, the increased milk volumes provided opportunities to upgrade existing production facilities, to construct new facilities and to retire old one. Pre-concentration by membrane filtration can be beneficial and increase capacity during the production of dairy based powders and formulations. However, increased milk volume can put pressure on processors’ finances, organisational management and staff.

New Zealand

He pointed out that around 1,000 new dairy farmers arrived in New Zealand’s South Island between 1994 and 1996, bringing stock with them. This resulted in a 55 per cent compound annual growth in its peak milk flow for the Southland Co-op for four consecutive years. Much of the funding to cope with this growth came from a bank which ended up owning more than 70 per cent of the company.

During the most rapid growth in production in New Zealand milk powder driers could not be built fast enough to cope with the peak milk flows, so casein and anhydrous milk fat factories were built to take the excess skim milk. Thousands of tonnes of washed wet casein curd was frozen and stored until the winter when it could be thawed and dried.

In 2001 a change in the law changed the status of the NZ Dairy Board allowing independent dairy companies to produce and export New Zealand made dairy products. All but two of the dairy companies merged to form the international giant Fonterra. Since then, the industry has coped with increasing volumes through a combination of added capacity, optimising the product mix, pre-concentration, and taking bottlenecks out of the system.

Mark Faherty is decidedly optimistic in his outlook for global dairy markets. “Since 2007 EU and world milk prices have converged and when we see a price decline like that which is anticipated, it’s important to focus on the fundamentals which are that the world’s population will increase and the wealth of consumers is increasing”, he told the conference. “Both these trends increase demand for dairy products.”

These fundamentals are the UN forecast for the world population to exceed 8 billion by 2025, an increase the size of an additional UK every year; and the OECD prediction of the world getting progressively wealthier with average world incomes moving from $13,000 to $17,500 driving per capita consumption growth.

Coming era hugely exciting

Faherty is extremely positive about where markets are likely to go in the next five years, notwithstanding the difficulties we are facing into. “The coming era is hugely exciting, and promises opportunities for those involved in the sector”, he said.

Quality control and assurance will be crucial competitive differentiators in future and Richard Fernandes outlined the advantages of the oxygen sensor technologies developed by Luxcel Biosciences for microbial control in the dairy sector.

“The dairy industry is changing”, he said. “it’s getting bigger and as the dairy market expands at a rapid pace the demand for superior quality and safety has never been greater.”

He pointed to a barrier to superior quality production which rendered the entire process vulnerable and this is the use of standard reactive testing technologies. These typically take up to 72 hours to deliver a result and can miss significant levels of spoilage while the Luxcel solution offers real-time analysis of products giving faster and more accurate results. “It can measure right through the process delivering a 100 per cent improvement in the detection of bacterial contamination in packaged milk and provides QA managers with a good night’s sleep”, Fernandes said.

Tom Mulqueen’s presentation covered the elements for success within the infant milk formula sector. These elements are building trust, acknowledging that breast is best, the value proposition, brand positioning, innovation and renovation, and listening to consumers.

On innovation he said that while science is at the core it must be commercially driven using consumer insights. “Innovation is long term and sequential in nature”, he said. “Remember your competitors are innovating too. Claims must be supported by scientific and medical evidence including clinical studies and timelines and investment must be factored into the business case for launch.”

Innovation must also be supported by live market feedback, he argued. “A dedicated consumer care line in every market, staffed by dedicated and caring professionals is an essential element of success”, he said. “This is designed to take care of mother’s needs, assist them through difficulties and promote positive and supportive relations. When difficulties do arise this communication channel is a lifesaver. Open communication channels, combined with a deep quality culture, strong science, medical strength and a caring approach will allow you to deal with big issues while preserving the health of your consumers and your reputation.”

The event also included 23 separate exhibits, highlighting relevant research activities taking place in both Teagasc and UCC. These included smart ingredients, infant formula, high protein powders, cheese diversification and technology, flavour chemistry and functional dairy nutrition.

Presentations and publications from the Teagasc Gateways to Dairy Process Innovation event can be viewed at teagasc.ie/ publications/2014/3415/index.asp