Waikato's busy milk processing sector to get another player by 2023. Photo / File
Singapore's Olam International will be milking lessons learned at a New Zealand dairy exporter's board table when it opens a new dairy factory in the Waikato.
The company, via its newly incorporated subsidiary Olam Food Ingredients New Zealand, is poised to make public details of its plan to build and commission a milk processing site in Tokoroa by June 2023.
Until this year, Olam, 53.4 per cent owned by Temasek Holdings Singapore, which is 100 per cent owned by the Singapore government, was a shareholder in the country's second biggest processor and exporter Open Country Dairy.
Herald inquiries show Olam's plan for a $100 million plant has yet to get Overseas Investment Office (OIO) approval, and consents from local authorities signed off.
But given Olam is not applying to the OIO under the "benefit to New Zealand" or sensitive land pathways but under the "significant business assets" application route, observers believe approval is assured.
Also, Olam is seen as a reputable company - its net FY2020 profit was NZ$252m - and would satisfy the OIO's "good character" test. It already owns 100 per cent of the shares in NZ Farming Systems Uruguay, a New Zealand incorporated agricultural company that applies Kiwi pastoral farming systems to Uruguay farms.
The OIO says Olam did not require its consent to buy the 11.8 hectare, industrial-zoned, property in Tokoroa's Browning St for the factory. It bought the land from Danish company SicciaDania NZ, which had acquired consents for a dairy plant. Olam has applied to local authorities to extend at least one of those consents, and for new operating consents.
Olam's financial interest in the New Zealand dairy industry goes back around 13 years. It first bought into Open Country Cheese, which became Dairy Trust, in which Olam had a 25 per cent stake. Dairy Trust became Open Country Dairy in 2008.
Early Open Country Cheese investors, Motueka's Talley's Group, now owns 100 per cent of Open Country Dairy, early this year buying out Olam's stake, by-then reduced to 15.1 per cent, for NZ$80.9 million. Open Country declined to comment for this story.
Olam is majority-owned by one of the world's biggest investors. Temasek, according to Olam's OIO application, is a stakeholder in Alibaba Group and asset manager Blackrock.
Olam itself is a global food ingredients and commodities business.
Its own publicity suggests it was not long in the dairy industry when it invested in Open Country. A 2004 media statement reported it sending its first consignment of milk powder - from an offshore processing site - to Algeria.
Invited to respond to the suggestion it would be using its Open Country lessons to set up and compete in the dairy sector, Olam said it had "enjoyed a long and successful history in New Zealand" through its previous investment in Open Country.
It said its subsidiary Olam Food Ingredients was developing a greenfield processing plant as part of its direct investment in this country.
"OFI is one of the largest suppliers of dairy products in the world, serving thousands of customers each year. It operates dairy farming and processing facilities internationally and the Tokoroa plant will complement and add capacity to OFI's wider dairy network.
"The aim of OFI's direct investment is to meet the growing demand from its global customers for high quality, New Zealand dairy products, and to offer more customised solutions for customers.
"OFI is current seeking dairy farmer input into its New Zealand business strategy. It is talking to dairy farmers to help shape its strategy and wider farmer support and engagement services."
The company said a key objective of its new plant proposal was to listen first to the views of farmers.
Olam International is 17.4 per cent owned by Mitsubishi Corporation, Japan's largest trading company. Another 16.4 per cent is owned by other shareholders including institutional investors. Its OIO application shows 87.9 per cent of those investors are from the Americas, 6.6 per cent from Asia, excluding Singapore, 3.9 per cent European and 1.6 per cent from Singapore.
Olam is building the processing plant despite general industry acceptance that New Zealand milk production has flatlined and will decline.
Federated Farmers president Andrew Hoggard, a dairy farmer, said news of another processor raised the spectre of over-capacity, as seen in the meat processing industry.
He said he also struggled with the idea of another processing player given "all the regulations on the horizon".
Olam will likely try to lure farmer suppliers from industry leader Fonterra, a cooperative with several Waikato sites, which requires farmers to buy shares to supply, or Open Country, which has two processing plants in the Waikato, and doesn't require share holding to supply.
There are at least two other dairy processors in the region.