As part of the agreement, Fonterra Australia will work with Tasmanian dairy farmers to establish an organic milk pool, with the organic milk going into Bellamy’s Organic nutritional powders to help meet demand in the Australian and export markets.
The long-term agreement accounts for the cost of conversion to organic and, if successful, will provide Bellamy’s with an additional secure, organic, fresh milk supply from Tasmania. Bellamy’s has signed up to take the first 20m liters of milk from the organic milk pool annually and will have first right over additional volume.
Bellamy’s will support the development of the pool with an initial investment of A$5.5m (US$4.1m) to assist the installation of processing assets to facilitate organic milk handling and processing.
Bellamy’s also entered into two other agreements on organic milk supply.
Growing urbanization and rising incomes continue to fuel the growth of nutritional milk powders across emerging markets, with the category valued at more than $50bn globally and growing at double-digit rates year-on-year.
Emerging markets
René Dedoncker, managing director of Fonterra Australia, said the agreement is a win-win for both companies and for Tasmanian farmers, and deepens the partnership that has been in place since 2015.
“Bellamy’s Organic is a rapidly growing organic nutritionals brand and is an important customer of ours, and today’s announcement is another example of how we’re playing to our strengths in cheese, whey and nutritionals,” Dedoncker said.
The partnership will see organic milk processed at Fonterra’s Spreyton plant in Tasmania, before being sent to Darnum in Gippsland, Victoria, for further processing into nutritionals.
“Tasmania offers the right conditions to develop a world-class organic dairy ecosystem. With its high rainfall and developing irrigation scheme, coupled with our agile site at Spreyton, we believe that Tasmania is an excellent location to grow a high-quality organic milk pool,” Dedoncker added.
“The development of an organic milk pool is also a positive for Tasmanian farmers, who will have the opportunity to tap into the premium and stability that organic milk attracts.”
Bellamy’s Organic CEO, Andrew Cohen, said, “We believe the rising demand for our brand and high quality, premium organic infant formula in Australia, China and emerging Asia can become an important and value-added platform for Tasmanian farmers, and look forward to talking more with the local community about this future.”
Other agreements
Bellamy’s also announced a new multi-year agreement to secure access to Australian sourced organic fresh milk with an affiliate of Australian Consolidated Milk (ACM), and an amended agreement with Tatura Milk Industries Limited (TMI) to incorporate fresh organic milk into production leveraging TMI’s organic dairy supply base.
Bellamy’s said it is committed to supporting the conversion of conventional Australian dairy farms to organic farms. This aims to support sustainable farming in Australia, improve farmer economics and promote safe premium Australian made organic products.
The existing minimum manufacturing commitments with TMI and Fonterra remain unchanged.
Australian Consolidated Milk
ACM has been developing its organic fresh milk pool since 2016. ACM will construct a new milk processing plant in Girgarre, Victoria during 2018, capable of processing organic milk simultaneously with conventional milk.
Bellamy’s and ACM’s new multi-year agreement gives ACM a secure end customer for its organic milk, which allows ACM to continue to invest in converting farmers and in turn, provides Bellamy’s guaranteed access to ACM’s organic milk.
TMI amendment
Bellamy’s and TMI’s existing supply agreement has been amended to formalize the incorporation of fresh milk into the production process at TMI’s manufacturing facility and reflect the cost benefit of incorporating liquid milk.