UK-based dairy foods company Dairy Crest has entered into a strategic agreement with New Zealand-based dairy co-operative Fonterra to sell demineralised whey powder.
Under the agreement, Fonterra will market and sell two Dairy Crest products for the fast growing global infant formula market.
In return, Fonterra will receive a commission to sell all of Dairy Crest's demineralised whey production and will also provide technical and engineering support. The agreement is for a minimum of five years.
Earlier, Dairy Crest announced a £45m investment to manufacture demineralised whey powder, a base ingredient in infant formula. This ingredient will be produced from the whey generated at its cheese making factory at Davidstow in Cornwall.
Dairy Crest has also announced a new £20m capital investment at its Davidstow site to manufacture galacto-oligosaccharide (GOS). GOS is a lactose-based prebiotic, widely used in infant formula. The company will enter into a joint venture to produce GOS with UK-based Fayrefield Foods Limited who will provide access to the necessary enzyme and other intellectual property.
Fonterra will supply lactose and will also take responsibility for marketing and selling this product. This project is expected to provide an eight year cash payback for Dairy Crest.
Commercial production of demineralised whey powder expected to begin early in 2015/16, while production of GOS is expected to commence later that year.
Dairy Crest chief executive Mark Allen said that demineralised whey powder and GOS form an important part of Dairy Crest's strategy to grow added value sales.
"We are excited to be working with Fonterra and Fayrefield Foods to bring these two innovative new products to market. These partnerships, with leading experts in the field, give us exposure to global growth opportunities," Allen added.
Fonterra Chief Executive Theo Spierings said the partnership provided the opportunity for both companies to grow volume and value by pooling their expertise.
Secretary of State at Defra Owen Paterson said, ""It's great to see an exciting development like this, which adds value, supports local talent and promotes British dairy products both at home and abroad. The global market is where the big opportunities lie - dairy product exports increased by more than 39 per cent since 2009 reaching £1.3bn in 2013."
