Milking formula for all it's worth

 

Ireland will soon be producing 20 per cent of the world’s infant formula

BY 2012, one in five babies worldwide who are fed infant milk formula will be given Irish-produced formula.

And with the global market growing by 15 per cent on average year-on-year, it is a sector that is set to become even more important to the Irish economy.

The key formula producers in Ireland (Danone, Wyeth and Abbott) supply 15 per cent of the global requirements for formula and 40 per cent of the EU market’s requirements. This is set to rise to 20 per cent of the global market when Danone’s €50 million expansion of its manufacturing facility in Macroom, Co Cork, comes on stream early next year.

The formula sector in Ireland accounted for €667 million in sales in 2008, of which almost 100 per cent was exported. The global market is valued at approximately $10 billion (€7 billion).

The five market leaders worldwide are Mead Johnson at 20 per cent market share, followed by Nestlé (18 per cent), Abbott (16 per cent), Danone (12 per cent) and Wyeth (10 per cent).

Three of those five key players already have significant operations in Ireland, employing 1,100 staff. Enterprise Ireland is actively pursuing the other two.

Michael Cantwell, manager of Enterprise Ireland’s food division, says Ireland produces in excess of 120,000 metric tonnes of formula a year, a significant output for a country of its size.

“This is a very important area for us for quite a number of reasons,” he says. “We are exporting close to €700 million of product per annum and using large volumes of raw materials. The [formula] sector globally is growing by about 15 per cent per annum, driven by a significant population increase, and this is a fabulous opportunity for Ireland.”

The availability of raw materials has been a challenge for Ireland at times, but Cantwell says the abolition of the milk quota in 2015 will substantially address that issue.

Another challenge looming over the formula business is the growth of the market in Asia, which is said to be significantly higher than 15 per cent a year.

A number of baby food companies have opened operations in Asia. But Cantwell says there is still a lack of confidence in domestic milk there following the 2008 melamine contamination scandal in China, which led to the deaths of at least six babies and resulted in thousands of infants falling ill.

“Ireland has been making infant milk formula products for a long time. Wyeth is here 30 years now. There is a trust in the quality and integrity of our product,” says Cantwell. “If something goes wrong with one of these products, it is almost impossible to regain market share. It’s such an emotive issue – you’re dealing with parents concerned about the health of their babies.”

According to Cantwell, the cost of doing business in Ireland in terms of labour, energy costs, etc is a major issue for the formula market. Volatility in the price of raw materials is another challenge. The strict regulatory environment brings its own challenges for companies but, on the other hand, it guarantees a high-quality, regulated product.

“Undoubtedly quality will improve in the Asian market. However, growth is so significant that they will probably need niche, high-quality products coming out of Ireland as well as the basics,” says Cantwell.

“I think overall it [the growth in Asia] will be good for Ireland. We have three of the main world players here. They get a significant amount of their own product from Ireland Inc and we are deeply embedded in their psyche, but there is the potential danger that we could lose some business to Asia.”

The market leader in Ireland is Danone Baby Nutrition, with its Aptamil and Cow Gate infant and toddler milk brands. Danone’s investment in Macroom will make the facility the most advanced manufacturing plant in the world in the formula sector and will treble capacity at the site to 100,000 tonnes a year.

Donal Courtney, managing director of Danone Baby Nutrition in Ireland, says the excellent workforce and access to high-quality raw materials through the company’s partnership with Dairygold were major factors in the decision to expand.

“When Macroom is up and running at full capacity, Ireland will be producing 20 per cent of the world’s infant formula and this is a tribute to the great raw materials coming out of the country,” he says. “I see the growth of the Asian market as a massive opportunity for Ireland and we should be exploiting our credentials over there.”

Speaking about Danone Baby Nutrition’s extensive research and development programme in Ireland, medical director Aileen Regan says there have been huge improvements in formula over the past 30 years as research has progressed in the area.

There is increasing evidence that milk-derived components can have positive effects on infant health. A team of researchers at Food for Health Ireland is “mining” or searching milk for ingredients to enhance nutrient absorption from infant formula, improve the gut flora, reduce the risk of infection and prevent allergy.

“We actually model our research programme on the composition and health benefits of breast milk. We recognise that breastfeeding is best for babies and provides many benefits above and beyond nutrition – it is the ultimate functional food,” says Sinead Proos, co-ordinator of the infant nutrition RD programme at Food for Health Ireland.

“However, for those who are unable to breastfeed or choose not to, we aim to develop ingredients for formula that bring formula closer to breast milk in composition or functionality.”

Supported by Enterprise Ireland, Food for Health Ireland links the expertise of researchers at University College Cork, University College Dublin, University of Limerick and Teagasc’s Moorepark Food Research Centre with the marketing power of four industry partners – Carbery Group, Dairygold, Glanbia and Kerry Group.