Creech venture to seek $25m

By PHILIPPA STEVENSON, agriculture editor

A new $30 million dairy company - the first since Fonterra formed 17 months ago - is about to launch under the mega co-op's nose in the Waikato dairy heartland.

The Open Country Cheese Company, headed by former National Party deputy leader Wyatt Creech, will this month apply for resource consents to build a cheese factory and tourism venture on the former Dairy Group Waharoa dairy plant site on State Highway 27 near Matamata.

Creech said the company's backers, who would kick-start the venture with $5 million, could make a public share offer in November to raise about $25 million.

"We've found a very enthusiastic response from the investment community," he said.

Coming so soon after Fonterra's formation in October 2001, and amid shareholder disquiet at its repeatedly low payouts, some in the industry see the project as a shot across the giant co-op's bows.

Waikato farmers in line to supply it have been some of the most unhappy, seeing the merger that formed Fonterra as little more than a takeover of their Dairy Group by former rival Kiwi Dairies.

Creech and Fonterra chief executive Craig Norgate denied Open Country would challenge the $14 billion co-op.

Creech described the proposal, which would occupy 4ha of the 18ha Waharoa site, as a modest factory using 50 million litres of milk to produce 5000 tonnes of high-quality semi-hard and hard cheese a year. It would export mostly to Australia, Japan and other Asian markets.

He briefed Waharoa dairy farmers on Monday night, had kept Norgate informed, and met Fonterra chairman Henry van der Heyden on Tuesday.

"We are trying to add a new dimension to the dairy industry," Creech said.

"We're about as small as you can go and still have the economies of size that you need to employ modern technology."

Fonterra handles 96 per cent of New Zealand's 13 billion litres of milk each year, making more than 300,000 tonnes of cheese.

It holds licences for exports to valuable quota markets such as the United States and Europe, which run until between 2007 and 2011.

Norgate said his company supported genuinely innovative proposals and niche marketers that weren't likely to compromise the value to Fonterra farmers.

"It appears that's what they are targeting."

He anticipated some criticism for Fonterra's failure to capture the cheese market Open Country had identified.

"But our focus at the moment is on doing the business we currently do better, [and] removing complexity. That means we are not going to be in every little market around the world. That is going to leave space for people and that is why we are happy to help them."

Creech, who founded the renowned Palliser Estate boutique winery in 1984 before entering Parliament, said the wine industry was the model for the cheese project.

"No one would ever say Montana is a poor-quality company but there is still room for a variety of niche players in that market."

Open Country had just concluded detailed investigations into establishing milk supply prospects, its ability to make high-quality cheese, markets and finance.

It had "satisfactory commitment" for milk supply.

Creech said the factory would also attract tourists, with inbuilt viewing stations. The site was ideally located on the main tourist route from Auckland to Rotorua and it had been a long-held wish of Open Country shareholder and Creech's National Party colleague John Luxton to build a showcase for the dairy industry.

Luxton, a former MP and food and fibre minister, is also a director and supplier of the top-performing Tatua dairy co-op.

Open Country was registered in November 2001, a month after Fonterra was set up.

Also on board are former Fonterra treasury head Geoff Taylor, who quit rather than move from Wellington to Auckland; Duncan Milne, a director of several rural companies, including Hodder and Tolley, Martinborough Vineyards, and the new company inheriting Wool Board assets, Wool Equities; Francis Dunlop of Palmerston North; Francis Bentley of Auckland; and Greg Misson of Cambridge, whose former company Innovative Engineering developed and built dairy plant.

Misson said he was evaluating the project technically. "There needs to be a new era in the dairy industry and I'm excited to be involved."

Matamata-Piako district mayor Hugh Vercoe did not expect opposition to the plan.

"It's been used as a dairy company, I can't see anyone objecting to it. It's good for the district."