Soaring demand drives new subsidiary
South Island Dairy LP is a new subsidiary of Invercargill-based Blue River Dairy, established in part to meet phenomenal existing demand from China for infant formula products.
Pivotal to South Island Dairy’s business strategy is to develop new market access into China, along with the innovation of products and brands independent of Blue River Dairy’s own highly successful brands of infant formula.
The volume of infant formula needing to be produced to meet the market has necessitated building a new dry powder blending and canning plant adjacent to Blue River Dairy’s existing factory in Invercargill.
The building was completed in June by lead contractor Archer Construction.
Blue River Dairy general manager Robert Boekhout says the plant is undergoing a rigorous process to gain approval for Chinese premises registration, in addition to brand and formulation registrations.
“Market consolidation and regulatory changes in the Chinese market have meant that premises with market access have been restricted to a maximum of three brands and a formulation that can be registered for sale. This was introduced in mid-2017.”
This limitation and the fact that Blue River Dairy’s present factory was producing near to its maximum capacity, meant the creation of a new company could provide a way forward.
“South Island Dairy is a strategic response to those changes.”
A significant market advantage will be that the registration will cover the manufacture of infant formula sourced from milk from three species, as is the case with Blue River Dairy – sheep, cow and goat.
“It gives us the ability to manufacture and offer our customers their choice of protein source that suits them best and also means we can manufacture complementary products utilising our key resources to their full potential.”
The premises registration through the General Administration of Customs China (GACC) is expected to be completed late this year.
The plant is also undergoing commissioning and validation under New Zealand regulations, required to ensure all systems and processes comply with the Ministry for Primary Industries risk management programme.
Once all these processes are completed, Chinese brand registrations for the actual infant formula can then be undertaken.
The extra capacity of the new plant not only means it will be capable of meeting present and future demand in China, but will also create options to expand globally.
“Until now, with just the one plant and so much demand in China, there hasn’t been the opportunity to look at other markets.”
Once fully operational, the plant will be capable of annually producing in excess of 20,000 tonnes of infant formula, or about 25 million cans, which is more than double the past year’s production by Blue River Dairy.
Production of the infant formula is a process of blending dry ingredients sourced from both New Zealand and overseas into highly specialised formulations.
“This new facility provides us not only a modern, purpose-built blending and canning operation, but allows us to be more efficient and use latest technology for processing, monitoring and security and achieve the highest compliance standards.”
Employing and training new staff, including an operations manager, process manager and others early in the design and development of the plant has been extremely beneficial.
This enabled the staff to have input into how the plant was designed and built, and to take ownership and control of the process of commissioning and validation.
South Island Dairy currently employs 15 full-time staff.The plant is expected to be fully operational in early 2020 when further staff recruitment will occur.
“It will eventually be running at capacity within three years and will see at least 70 staff employed.”
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