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Dairy giant Fonterra sets sights on Europe

Fonterra is in talks with 10 different European dairy processors with a view to a joint venture in cheese and whey production.

Letters of interest have already been signed with at least two of these, with Fonterra's European general manager, Koert Liekelema, refusing to rule out the possibility of the involvement of a British or Irish company.

"The global footprint of milk from New Zealand is actually going to shrink as we focus more on servicing Asia which is the fastest growing market in the world at the moment," said Mr Liekelema.

One third of all the milk that Fonterra currently processes is already sourced outside of New Zealand. However, the company now wants to access large volumes of extra milk around the world to cope with surging demand.

"The sooner we increase our milk pool to the point that 50pc of all our milk is sourced outside of New Zealand the better, because we are short of milk right now," said Mr Liekelema, who addressed a food and agribusiness event in Dublin last week.

"We're going to process local milk and our main focus is on countries with the most potential for expansion post quota in Europe."

The Fonterra boss said Ireland, Britain, Holland, Germany, France and Poland had the most scope to expand, but that Ireland had more potential than most.

"Ireland has the biggest leeway to expand," he said. "For example, Dutch dairy farmers are required to reduce carbon emissions over the coming years, which will hamper their scope for growth. We're interested in linking with a hard cheese manufacturer that has scale and is willing to invest.

"A hard cheese manufacturer would allow us to improve the seasonality of supply of cheese to our customers, while at the same time giving us access to high quality whey which we think is a fantastic product for the specialist proteins that we are finding a lot of demand for in sports drinks and confectionery. It would also allow us to pool our R&D expertise with our partners."

Michael Barry, of IBEC's dairy division, said the comments were a confirmation that the Irish dairy industry's targeted rise of 50pc was being taken seriously by the big players.

"The Irish industry would be a good fit for Fonterra due to the similarity of the type of products that we specialise in and the contrasting seasonality of both countries," Mr Barry said.

Ireland's biggest cheese manufacturers include Glanbia, Dairygold, Kerry and Carbury, along with the Irish Dairy Board, which converts large volumes of Irish milk into cheese in Britain.

Fonterra is 10 years in existence this year and processes 20bn litres of milk, roughly four times that of the entire Irish milk pool. Average herd size for Fonterra suppliers in New Zealand has grown to around 500 cows.

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