Danone grows in NZ as action against Fonterra continues
French infant formula maker Danone Nutricia is in growth mode in New Zealand, saying it is a “key strategic” manufacturing point in its world network.
With construction under way on a $25 million new blending and packing plant development at its Auckland operation, subsidiary Danone Nutricia NZ said its recent investment in New Zealand plant upgrades now totals $40m. It employs more than 400 people here and expects the Auckland expansion to create more jobs, though New Zealand operations director Cyril Marniquet could not say how many.
The plant is expected to be finished by mid-September, he said.
In 2014 the company bought the Suttons and Guardians companies, which gave it a spray drying facility at Balclutha in the South Island and blending and packing operations in Auckland. It has since sourced milk directly from 18 farms around the Balclutha factory. Base milk powder is sourced from a number of suppliers in New Zealand and Australia.
The acquisitions were made the same year Danone terminated its supply agreement with Fonterra following Fonterra’s botulism product contamination scare in 2013.
Paris-based Danone, a global food company with annual revenue of NZ$35 billion, has also taken two legal actions against Fonterra over the false alarm incident. One, seeking damages of $980 million, is to be decided by arbitration in Singapore. Danone said the case was “ongoing”.
The other is for $545m, the amount Danone says the incident cost it when it had to recall 67,000 cans of its Karicare baby formula brand from Asia-Pacific markets, including China. This claim is to be heard in a New Zealand High Court but will not proceed until the Singapore proceedings are concluded. Fonterra has provided $11m on its books for the claims, which it says represents the maximum contractural liability to Danone.
Last week Danone Nutricia said it had stopped supplying Karicare products to China.
Asked why, the company told NZ Farmer it had decided to focus on developing its international brands Aptamil and Nutrilon in the China market and had stopped supplying Karicare in line with that strategy.
Danone’s Auckland and Balclutha operations supply base milk powder to Danone Nutricia plants in Asia Pacific and finished products to markets including New Zealand, Australia, China Hong Kong and South East Asia.
In New Zealand the company says it is the market leader in early life nutrition products with more than a 60 per share.
Its baby, toddler and specialty brands here include Karicare and Aptamil. Karicare has 46.6 per cent of the New Zealand baby formula market. The expanded Airport Oaks plant would continue to produce a number of brands for the New Zealand and international markets, the company said.
The Auckland development includes an innovation centre to launch new products and packaging for the Asia Pacific region. In 2014 Danone said it planned to use New Zealand as an innovation hub for infant formula products.
Marniquet declined to give more details about the innovation centre but said it would focus on commercialisation of innovations in packaging and quality. Danone had two major research and development sites, one in the Netherlands and the other in Singapore, he said.
Danone Nutricia has 23 manufacturing plants around the world. It has been in the New Zealand market for nine years.