The big, comfortable, covered catering area for the 300 contractors building the country’s newest milk factory might seem an unlikely analogy for the culture the management at Mataura Valley Milk is trying to engender.
But forget packed lunches.
Caterers provided workers building the nutritional dairy plant near Gore with barista quality coffee and cooked meals and while it was costly, Mataura Valley Milk general manager Bernard May said the message it sent about the philosophy and culture they wanted to create was far more important.
“If we want a welder to do the world’s best weld we want to ensure he feels looked after and safe.”
From the start Mataura Valley Milk has set its sights on making the world’s best paediatric and adult base nutritional powders, a complex and exacting business that required a culture of excellence among staff and quality processing systems.
That bid for excellence started with construction staff building the perfect $227 million plant, which was designed by leading experts from around the world.
May said to sell nutritional formula for $85 a can instead of $30 meant there was no room for a she’ll-be-right attitude anywhere in the company.
All the company’s eventual 65 staff had to constantly strive for excellence.
Mataura Valley Milk would be the only New Zealand plant to comply with nutritional standards set by the Ministry for Primary Industries, China’s Food and Drug Administration and the United States Food and Drug Administration.
Another layer of validation of systems and processes by an external agency had been added above that compliance to provide further quality and safety corroboration for customers.
“We are going beyond compliance to validate to customers that everything in the business is working as it should.”
May said the approach taken to product quality and risk was similar to that adopted by a pharmaceutical company.
“It’s a different approach to looking at risk and managing risk to meet consumers and customers’ requirements.”
The raw milk processing area, for example, was in its own building 120m away from the sterile nutritional production plant because contamination from raw milk was considered a significant risk.
Mataura would be supplying an established, integrated supply chain meaning it would be making sales and earning revenue from the first day of production in August.
China Animal Husbandry Group (CHG), one of 19 agricultural companies owned by the Chinese government, owned 88% of Mataura but that would dilute to the mid 70s when 35 to 40 farmer-suppliers took up shares.
Other shareholders were local investors along with Hamilton-based blending, canning and sachet business Bodco.
CHG recently increased its shareholding in Bodco and also bought a stake in Auckland nutritional manufacturer and sales company Nouriz.
It had been selling in to China for six years, supplying 5000 stores in 150 cities with 2016 sales of $300m.
That common shareholding created the integrated supply chain.
In the first few years up to 40% of production would go through Nouriz and the rest to other leading international nutritional manufacturers.
Mataura would establish its own brands and specialty products such as butter, cream and anhydrous milk fat and could produce whole and skim milk powder
The company required about 100,000,000m to 130,000,000m litres of milk a year or supply from between 35 and 40 farmers, who would be selected from within an 80km radius of the plant. Almost three times that number have expressed an interest in supplying MVM.
May said raw milk contributed between 20% and 30% of the end product with the balance ingredients sourced from around the world and blended with fresh milk. The liquid was then dried, packaged and shipped to customers.
Milk suppliers would have to adhere to strict quality standards and become shareholders in the company, paying $2 to $2.50 a share.
May said that meant not feeding palm kernel to cows, as palm oil was no longer used in formula. Milk had to be chilled below 4.4degC in accordance with USA FDA standards, meet a low somatic cell count targets and farmers would have to adhere to animal welfare and environmental standards set by organisations such as Dairy NZ and Environment Southland.
“It is a brand reputation risk we don’t want to incur.”
Eventually May said MVM wanted to establish its own farm gate milk price, but it would start at a level at least 20c a kgMS supply premium above competing prices. In addition it would be topped up with incentives of up to 10c a kg for milk quality.
Farmers would also be incentivised to produce milk on the shoulders of the season and during winter, earning from 50c to $1.50 a kg MS depending on when it was supplied. May said that reflected higher feed costs but also capital investment in standoff pads and wintering sheds.
Suppliers would be confirmed in February, the plant commissioned in June-July and production of the first milk and infant milk formula in August
May said MVM would invest in other nutritional products, but said success would be judged somewhat differently to traditional manufacturing companies.
“Success for us is not building another drier to dry more milk. It’s investing in plant capability that adds more value to milk already supplied by shareholders.”