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Saturday 3 December 2016

From cradle to grave: a bright future for dairy

Abbott's Irish branch leading the way in products people likely to buy in the coming decades

Published 24/05/2011 | 05:00

One out of five bottle-fed babies globally are fed on milk formula produced in Ireland. It's an astounding statistic, given that our nation accounts for less than 1pc of global output.

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Of even greater interest to Irish farmers is the fact that the production of ultra-specialised products that cater to the specific nutritional needs of the human body, from birth through to old age, is set to out-perform almost every other dairy category in terms of growth over the coming decade.

One of the main pioneers of this highly profitable niche sector here is the US-based Abbott. Although it has 14 separate sites with more than 4,000 employees in Ireland, this hugely successful company keeps a remarkably low profile.

Abbott's involvement with the Irish dairy sector began in 1975, when the company opened a processing plant outside Cootehill on the Cavan-Monaghan border. In that first year, the plant processed 45,000 litres of milk a day. Today, it churns through 500,000 litres a day, converting milk from 1,000 Town of Monaghan suppliers north and south of the Border into infant formula for export all over the world.

"The biggest expansion was in 2004 when we invested €80m to effectively double our capacity to the current level," said Abbott's European director of manufacturing, Eamonn Lennon.

But on the back of annual growth of 20pc in sales regions such as Asia-Pacific, Abbott is in the process of ramping up capacity yet again.

"We're finished commissioning the latest expansion and are just in the process of finalising licensing that will allow us to increase output by another 10pc," said Mr Lennon.

With rapid expansion taking place on dairy farms in the region, the company is content that any amount of milk is available locally if they chose to keep expanding.

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When asked if the plant has reached its limit in terms of output, Mr Lennon tellingly replies: "There's always something in the pipeline."

When asked if the Irish dairy industry is still a competitive source of raw material compared to other lower-cost regions of the world, Mr Lennon is adamant that Irish farmers can be confident for the future.

"New Zealand is one of the key competitors out there and we do buy some product from the likes of Fonterra for use in some of our Asian operations," he said.

"But the Irish dairy industry is very well established on the world stage and there is more to the long-term future of plants like this than a cheap supply of milk. There's the integrity of the supply chain regarding everything from how the cow is fed to the quality of the milk that arrives at our plant and the regulations that govern that.

Asset

"The other important asset that the Irish dairy industry has built up over the years is an educated workforce and an important R&D facility in Moorepark. I don't see any rationale for Abbott to duplicate what it has in Cootehill by building more plants, but there is plenty of scope for increased output."

While the farming community might consider the baby-food sector as a niche in its own right, Abbott's range of products are proof that in order to be successful in this sector, products must be tailored at much more distinct groups within the whole paediatric sector.

"Abbott sells over €2bn of product into the paediatric market every year, but the Cootehill plant only caters to a fraction of that market," said Mr Lennon.

"We concentrate on products for babies from 0-3 months, 3-6 months and finally 6-18 months. But there are other products that cater for toddlers up to five years, specialist lines such as lactose-intolerant ranges, ones for children suffering with colics and so on."

And while the multi-billion euro paediatric food business has been growing globally at 6.5pc in recent years, Mr Lennon believes that the real action is going to be at the other end of the scale catering to older people's nutritional requirements in years to come.

"Older generations need products that are high in protein to boost muscle replacement," said Mr Lennon.

"They can also have disease-specific requirements such as diabetics or cancer patients. Abbott is already producing a product called Prosure that is designed specifically for this latter group. It is based on the fact that people on good planes of nutrition tend to recover from illness faster."

Appetite

That may sound like common sense to many, but when you consider that many seriously ill patients lose their appetite, food designed with concentrated forms of nutrients derived from the protein fractionations that can be broken out of milk casein are in increasing demand with hospital dieticians.

And, with recent data showing two-thirds of all the people that have ever reached the age of 65 are alive today, it appears that the number of potential customers in this 'older persons' market is set to rocket.

"We all want to live longer and stay active longer," said Mr Lennon succinctly.

Abbott sales have been focusing on the rapidly expanding markets that they are encountering in the Middle East, Russia, South America and Asia.

But is it realistic for us to expect markets such as Asia, which have traditionally been lactose intolerant or, at the very least, reluctant consumers of dairy products, to simply keep on consuming more and more dairy product?

"We are seeing greater growth of dairy products than the lactose free ranges, even in places such as China," said Mr Lennon. "It's all on the back of a trend towards more Western diets."

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