China Business 2012: Nothing ventured, nothing gained

David Spurway at Mengniu. Photo / Supplied

Kiwi entrepreneur David Spurway credits legendary Chinese dairy leader Niu Gensheng as the inspiration for his decision to jump straight into the infant formula market.

Gensheng - a visionary but egotistical businessman - built an Inner Mongolian-based dairy plant into multibillion-dollar company. But he was ousted as Mengniu chairman after melamine contamination was uncovered.

Spurway met Niu when he went up to Hothot to look at building an R&D centre for the Chinese company. He was then a process engineer for NZ's BW Murdoch. But the small firm won the bid against a major transnational.

At ANZ's recent Growth Strategy Owners' Forum, Spurway's presentation stood out for the passion and verve with which he unveiled his strategy.

He recounted how he was captivated by Niu - the Chinese entrepreneur's energy and can do mindset rubbed off.

Although there were "lots of arguments" he worked 24/7 and got to drive Niu's flash car when the boss was away on business.

What he did learn was the importance of "jumping into the pool".

"I had for some time wanted to be an equity partner or business owner," he says. "With years of experience in building factories and technical aspects of dairy manufacture I started to seek out opportunities to build a food manufacturing business, utilising New Zealand's competitive advantage in safe and competitive dairy products."

Spurway began working on New Zealand New Milk in August 2010. The original concept was to build a smaller "boutique" organisation.

"However, I quickly realised that to secure growth customers in international markets we needed an impressive facility that mirrored the quality we were to achieve in our product."

Funding took five months to raise. The company was inaugurated in February 2011. It took a further seven months to build and commission the factory.

"Our first stage must be to consolidate as a new business - we continue to improve our systems and focus so when opportunity arises we can grow successfully.

The strategic imperative is to ensure infants and young children are offered safe produce.

"We take it for granted here as our food chain is generally reliable, but that is not so everywhere in the world," says Spurway. "The emerging markets continue to grow and seek out dairy produce which is reliable - where better to come than New Zealand. That imperative allows an opportunity for us. We choose infant formula as a product to manufacture - it requires the highest standards in manufacture."

He believes the opportunity for New Zealand dairy products is vast pointing to how Kiwi farmers continue to raise efficiencies.

Cows are still grass fed in the field, which offers a cost competitive advantage.

Spurway points out that in China, raw milk is more expensive. Production and compliance costs are increasing sharply and the produce is often tainted. "We hear of 'melamine' and think of an "on-off" issue, but almost on a monthly basis other stories of poor quality are reported in China's food chain," he says.

"There are similar issues with many of our Asian neighbours, so it is no surprise, the interest we currently see in New Zealand dairy."

New Zealand New Milk is a privately owned company. Three staff have invested in the business.

"Our key investment is from New Zealand individuals who have a passion for business and dairy," says Spurway.

"The only thing that can stop us now is another scandal affecting a New Zealand company."