New Zealand dairies poised for global leadership

New Zealand's dairy industry enjoys a strong position from which to attain leadership status in the global marketplace, especially with the recently inked merger pact between its two biggest players.

That's according to economist Alan Jackson, Sr. VP of Boston Boston Consulting Group, who notes the power of the proposed alliance between Kiwi Co-operative Dairies and the New Zealand Dairy Group.

Signed in December, the merger pact paves the way for possibly bringing other companies under the umbrella of a multi-dairy mega co-op. (See related article).

At press time, the deal awaits the OK from 75% of the company's shareholders. The boards of both concerns have already given the proposal a unanimous thumbs-up.

"Of all New Zealand industries, dairying is by far the best-placed to become a truly global market leader in both consumer and industrial products," Jackson was quoted this week by New Zealand news service NewsRoom.

If the dairy industry fails to become a worldwide leader, Jackson said it would be "inexplicable waste of an opportunity" for producers and the entire nation.

Several factors have prompted the transition of the New Zealand dairy industry's orientation from local to national to global.

Reducing the costs of manufacturing and distribution have driven much of the movement, but other issues also have figured in, such as the need for efficiencies in R&D and brand development, and the imperative to spread these costs across a growing number of consumers.

Consumer tastes also have become more unified, Jackson said, enabling the debut of products into several markets simultaneously vs. being forced to manufacture specific products catering to differing local palates.

Predicting that as few as 10 grocery firms would eventually come to control food retailing worldwide, Jackson said these companies are going to want to do business with global suppliers.

Even though New Zealand's dairies have enjoyed overseas successes, Jackson described the industry as a "relatively small player in key regions," having grabbed less than 4% of the Asian and 2% of the South American branded dairy product markets.

Kiwi, NZDG and others should move fast to boost that footing since competitors also have been eyeing those region's markets, he said, urging the industry to adopt a "unified vision" in building for the future and ensuring its ability to finance growth.

Pulling strong management into the ranks also will make an impact, Jackson maintained, since the industry needs to have a "willingness and ability to take bold action."

Edited by Gerry Clark,
Managing Editor, Dairy Network.com