Fonterra Dairy Co-operative is combining its expertise in liquid milk formulations, with its business, technical and marketing know-how, in a new, value-add business focused on licensing its intellectual property (IP).
Dr John Smith, Fonterra Business Manager Formulated Milks, says the new business incubator will focus on licensing “formulations and IP” in return for sales-based royalty payments or licensing fees.
Says John: “This is very exciting. The possibilities are huge. We want to establish a small set of customers that rely on us for their product development, who will tell us their business strategies and what products they want ahead of time, so that we can develop them. We want to be fully integrated into their business so that we are part of their ongoing success.
“What we are doing is asking customers to pay very transparently for the value we bring and in that way we will be recognised as a value-adding company. This is a model which has potential to roll out into many other businesses within Fonterra.”
The main target markets for Formulated Milks are Asia, particularly China, and the Middle East with nutritionally enhanced milk products.
These include “Junior”, a milk for 3-10 year-olds, which has additional iron, protein, Vitamin C, Vitamin D and calcium, “Nurture”, a milk for pregnant women, with added iron, folate and calcium and “Silver”, a milk for active seniors, with extra calcium, Vitamins D and B12.
Other formulations include products containing non-dairy protein, such as rice and soy milks, a specially formulated milk suitable for people with Type 2 diabetes and “Dulce de leche”, a caramel flavoured ingredient for use in a range of dairy-based products.
Launched in October, the Formulated Milks incubator business is in discussion with a number of potential customers and, says Dr Smith, the future is looking good.
Fonterra’s New Business General Manager Craig Knox says the addition of the new incubator business, Formulated Milks, is a significant step forward in building Fonterra’s value-add activities and a further eight to ten potential incubator businesses are being explored.
Fonterra’s Marketing and Innovation Group, which concentrates research and development, and marketing staff, at Palmerston North, was established last year to drive value-added growth in Fonterra’s Ingredients business.
Specialty ingredients growth businesses are currently growing at 12 per cent a year, contributing more than $500 million in revenue in the last financial year.