Focus: Fonterra looks to broaden innovation horizons
Fonterra has teamed up with CSIRO to work on areas including herd productivity, processing and consumer health
New Zealand dairy giant Fonterra has joined with the Australian science agency, the Commonwealth Scientific and Industrial Research Organisation (CSIRO), in a strategic research partnership in a bid to seek solutions from outside the dairy sector. Ben Cooper reports.
The recent news of a major partnership in China and a NZ$555m (US$464.6m) expansion in production capacity underline Fonterra's position as a global giant with growth ambitions to match - but a less reported recent tie-up serves to highlight the company's aspirations to be a global leader in innovation.
The company, which processes some 22bn litres of milk a year making it the largest milk processor and dairy exporter in the world, entered a five-year strategic agreement last month with Australia's national science agency, the Commonwealth Scientific and Industrial Research Organisation (CSIRO).
The move speaks to the Kiwi dairy co-operative's desire for an innovation model to underpin and "propel" its overall so-called V3 (volume, value, velocity) business strategy, by driving innovation across a range of areas from sustainable farming and manufacturing to health, nutrition and product development.
The decision to partner with an organisation with diverse activities beyond the scope of the dairy sector is critical. Through the agreement, Fonterra will benefit from CSIRO's broad capabilities across areas such as remote sensing, resource engineering, ecosystems, food and water, the company said.
In the words of its chief technology officer, Dr Jeremy Hill, Fonterra is intent on "leaving no stone unturned" when it comes to ensuring Fonterra stays at "the cutting edge" of dairy innovation.
"We intend our partnership with CSIRO to develop a range of solutions to address Fonterra's science and technology needs," Dr Hill says. "On-farm, CSIRO will turn their attention to herd productivity, effluent management and milk quality, and then work through our supply chain looking at processing and analytical technology, food structure and design and consumer health benefits."
Dr Hill sees innovation developed in collaboration with external partners such as CSIRO as crucial in meeting the needs of new markets and enabling the dairy sector to remain commercially and environmentally sustainable, pointing in particular to CSIRO's diverse portfolio.
"CSIRO has developed 3D printed devices to treat sleep apnoea, soil contamination detectors and highly efficient solar technology," Hill says. "These technologies aren't traditionally associated with the dairy industry, but it's the science and thinking behind these innovations that will benefit our focus on getting more value from our farmers' milk and doing so sustainably."
The fact Fonterra has looked across the Tasman Sea in search of a research partner has been the subject of some discussion in the dairy giant's domestic market, where Fonterra already participates in the industry-wide research and development (R&D) programme, DairyNZ.
However, in an interview with Radio New Zealand, Hill defended the move as complementary to its partnerships with research organisations in New Zealand.
"CSIRO's an extremely broad and diverse organisation, so it has science and technology capabilities in agriculture and food, but also in such areas as mining, [and] information technology," Hill said. "And the idea behind the partnership is not really to compete against existing partnerships with the New Zealand based organisations but really to complement them, and to bring some of the quite different capabilities in science and technology that exist within CSIRO."
Joanne Bills, director of Australia-based food industry consultancy Freshagenda, believes the move should not be seen as a "slight on existing structures" in the sector.
While Bills points out industry-wide initiatives can be hampered by the need to be pre-competitive, she believes Fonterra's move is borne primarily out its desire to seek solutions from other sectors.
Speaking to just-food, Bills says the partnership with CSIRO is both an "interesting" and "pretty smart" move.
"It seems they are deliberately looking for some design and innovation thinking that is outside the dairy industry – which I thought was a pretty smart idea," Bills says. "While industry expertise is great, I guess there is the danger of group-think, which a tie-up with an organisation as vast and innovative as CSIRO could help break apart. This seemed like a really smart move to tap into some considerable intellectual grunt that is so much broader than a specific industry sector."
Hill went on to say in his Radio New Zealand interview that the move was in keeping with an open and non-prescriptive approach to research. "Rather than be prescriptive about what solutions we're looking for, we're keen to share with our partners what the opportunities are we're looking to capture and some of the problems we've got that are preventing us from doing so. Essentially we're unleashing the intellectual firepower in those organisations to come up with solutions that we couldn't have possibly thought of, anyway."
For instance, CSIRO's mining technology expertise, notably in dealing with water issues, could be applied to the dairy industry, he added, while CSIRO's work in 3D printing technology could help in the development of new packaging.
Fonterra, which reported turnover of NZ$18.6bn in 2013 from operations in more than 100 countries, prides itself on being an innovation leader. Among the achievements it claims for its R&D Centre in Palmerston North are the development of spreadable butter straight from the fridge and its Anlene range of bone nutrition products.
Moreover, the company already adopts a broad-based approach to R&D. In addition to its Palmerston North unit, Fonterra has innovation units in Melbourne, Amsterdam, Chicago, Shanghai and Singapore, while its "open innovation" policy "encourages the contribution of external partners to develop new products and technologies". Fonterra also says it has active research partnerships with dozens of universities and research facilities around the world.
Such an approach, Hill believes, is the "way forward" with regard to innovation. "To be successful today you need to be highly connected, you need to be leveraging lots of different types of capabilities, networks, putting together different elements in order to create some novel solutions."
Fonterra is the world’s largest milk processer in the world, and in 2012 was ranked fourth in Rabobank’s Global Dairy Top 20. Fonterra has posted impressive half yearly results in 2013, showing a 33% ...
Fonterra Brands (New Young) Pte Ltd plans to promote its products by sponsoring cooking events, seminars or competitions and by sharing the recipes with dairy products and butter. The majority of its ...
Fonterra is ranked in the top 21 among dairy players. However, this is due for the most part to its strong presence in Australasia. The company is looking to diversify, investing in a China-based dair...
Over the forecast period, Fonterra Brands (Hong Kong) Ltd is expected to focus its efforts on dominating the supply of dairy products in the foodservice channel. This is likely to be achieved by gener...
- Focus: Danone CEO Faber puts stamp on business
- Cleaning up Tesco will have mixed supplier impact
- General Mills US "priority" categories gain share
- The just-food interview: Doux CEO Arnaud Marion
- Interview part 2: BRF CFO Augusto Ribeiro
- General Mills outlines "aggressive" NPD drive
- Coles supplier payments broke competition law
- Kraft to reappraise business, says new CEO Cahill
- General Mills earnings drop one-third
- PepsiCo opens snacks plant in Saudi Arabia