By PHILIPPA STEVENSON
agricultural editor
A bid for millions of dollars in compensation from the European Union could be the next move by the New Zealand Dairy Board in the spreadable butter row.
Last week, the EU Council rubber-stamped the proposal it adopted in June to end the dispute, which arose after
it placed a high tariff on the spreadable New Zealand product in 1996.
The high-value butter was excluded from New Zealand's low-tariff, 77,000-tonne butter quota because the EU ruled that it was not made directly from milk or cream.
That forced the Dairy Board to cut production at a brand-new spreadable butter plant at Northland Dairy's Kauri site and switch to higher-cost manufacturing in Belgium in order to preserve its share of the emerging market.
Board spokesman Neville Martin said that in the four years since the ban, competing companies had moved into the market with "me-too products."
At the same time it had not been nearly as profitable for the board to produce the butter in Belgium, so there had been little sense in increasing volumes or aggressively promoting the product.
"We lost out. We had a premium product and were set to hit 5000 tonnes a year.
"We are under no illusions that we can now get back there."
Spreadable butter commanded a price premium of more than 20 per cent over the standard product, but was also successful in reaching new consumers who were young, affluent and sought convenience and taste.
Consumers of regular butter are more likely to be older, Mr Martin said.
New Zealand initiated a World Trade Organisation dispute settlement procedure after bilateral consultation on the issue failed. That process was suspended in April after further negotiations.
Previously, the board said it would consider seeking compensation for its losses and its legal bill, which together are expected to total hundreds of millions of dollars, but so far it has not confirmed the move.
Meanwhile, at the other end of the price scale, the board has launched two products into the billion-dollar global market for budget-priced wholemilk powders.
The market among the world's poor is typically met by "filled " milk powders, which are a blend of dairy protein and vegetable fat such as palm oil and are up to 30 per cent cheaper than wholemilk powders.
After five years of research, the board has launched the all-milk Ucare in the Philippines and Vivalac in Venezuela.
The board's global category manager of milk powders, Russell Martin, said the products were blends of skim-milk powder and other dairy ingredients such as buttermilk and whey.
Ucare has been endorsed by the Philippines Department of Health.
Last year, the board launched 50 new products on the international market.
