Common vision could double dairy industry

By Glenys Christian

Over the gate

Imagine a New Zealand dairy industry double its size, with highly profitable production facilities in overseas countries, and a huge array of consumer goods to sell, not just related to milk.

This is the vision of University of Auckland marketing professor Wayne Cartwright, who maintains this is exactly where the country's largest business can end up by 2006 if it pools all its collective strength together.

"The dairy industry is on the cusp of where it goes because it has the opportunity to become truly world class," he says.

The consistent advocate of single seller marketing arrangements welcomes the present open talk of dairy companies combining into just one commercial entity.

"The logic has been apparent for some time," he says.

"At stake is the medium term survival of the industry. There are going to be massive changes over the next five years."

Professor Cartwright, who has been working with the dairy industry on its future investment in technology over the last 18 months, says he is not concerned about a couple of small players such as Tatua choosing to remain outside such a large new body.

But it is essential in his view that the two heavyweights of the industry, the New Zealand Dairy Group and Kiwi Co-op Dairies, join forces. They need a common focus or else the loss of income that their rivalry costs their shareholders, as well as the wider industry, will continue.

The new collective company as Professor Cartwright sees it would have the operational efficiencies of a major world player in the food business in an era when only transnational companies are likely to be successful.

"The dairy industry needs to stop thinking of itself as an exporter," he says.

"It needs production bases in other countries so it can get in behind trade barriers."

Pressed to put figures on what all this might mean, Professor Cartwright takes what he says is a conservative view. The industry could double its size in seven years time he believes, moving into a huge variety of consumer products on supermarket and speciality store shelves.

There would be no hard and fast limits on expansion with increased financial resources. Consumers' growing interest in health products could be catered for by using ingredients derived from milk or from completely different sources.

And Professor Cartwright says there are even greater gains to be made through being first in biotechnological advances. "The leaders in that field will literally cream the others," he said. "The wild card is genetic engineering."

This is a crucial issue for dairy farmers to consider when weighing up the options of where their industry will go and whether it can break through the $10 billion annual earnings barrier.

As a world food leader, image is all. It is much too important to be worked on piecemeal by small companies who do not share a common vision.

* Glenys Christian is on email at glenysfarm@xtra.co.nz