Unlocking the value of milk: Fonterra is just getting started, says CEO Miles Hurrell

Fonterra is just starting to unlock the value of milk, says chief executive Miles Hurrell.

Dairy heavyweight Fonterra will open a new research centre in Ireland soon, with the aim of bringing several new probiotic strains for health and wellness products to market in the next five to 10 years.

Expected to be operational by the end of this year, the centre is the result of Fonterra signing a strategic research partnership with APC Microbiome, a research centre at the University College of Cork.

The partnership will focus on the human microbiome and develop new probiotic products, Fonterra chief executive Miles Hurrell told the recent International Dairy Federation world summit in Chicago.

The microbiome is the collection of all microbes, such as bacteria, fungi, viruses and their genes, that naturally live on, and in, human bodies.

So small that they require a microscope to see them, they contribute in big ways to human health, scientists say.

Hurrell told the gathering of world dairy industry leaders that as part of its product innovation drive, Fonterra had established a new corporate venture whose job was to seek, partner with, and invest in global startups in the human health sector.

Fonterra chief executive Miles Hurrell says the co-operative has its eye on the global health and wellness market .

The New Zealand dairy industry has a long and respected history in deep dairy science. Fonterra, created in 2001 from an industry mega-merger, inherited a collection of culture strains, considered among the world’s largest. It now numbers more than 40,000 strains.

Hurrell told the summit the new partners would benefit from access to this Fonterra expertise and understanding of the global market, while the farmer-owned co-operative itself would benefit from emerging technologies, science advances and new channels to market.

The first investment for Fonterra’s new research venture division was in San Francisco-based biotech company Pendulum, which specialises in targeting metabolic health through evidence-based microbiome solutions.

“Together we plan to co-develop and commercialise next-generation gut health products for global customers,” Hurrell said.

The global health and wellness market was valued at more than US$60 billion ($102b) and growing 6 per cent a year, he said.

Medical nutrition was valued at US$50b globally and growing 5 per cent a year.

Fonterra was using its probiotics expertise to tap into these markets as it eyed, more generally, the new opportunities for dairy consumption among a growing, and ageing, global consumer class, Hurrell told delegates.

The future of dairy was bright, he said.

“Recognition of the natural goodness of dairy is growing, [with] trends towards more Westernised dining and a growing interest in health and wellbeing are creating new opportunities for dairy consumption.

“The global consumer class is forecast to grow by more than 100 million people per year through to 2030, driven largely by Asia.

“The world’s population is also ageing, with one in six people to be aged 60 or over by 2030 — just six years away.

“There’s growing evidence that quality dairy nutrition can support healthy ageing and we expect consumers will continue to seek nutrition solutions that support their health and wellbeing. Through innovation, we have the ability to solve these challenges and unlock the potential of dairy.”

John Stevenson, chairman of Fonterra’s farmer watchdog, the Fonterra Co-operative Council, told the Herald the council supported Fonterra pursuing growth opportunities but would expect shareholders’ capital to be respected by the company.

The council also expected the company to be transparent in reporting on the various research and innovation ventures, he said.

“Not every venture will grow wings and fly but we expect farmers’ capital to be treated with respect and care. Farmers do not take high risks on farm with their capital and expect a similar approach from the company.”

Hurrell told the summit with so much potential ahead unlocking the value of milk, Fonterra was “just getting started”.

Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.