October 25, 2016

Quenching Asia’s growing thirst for dairy beverages

Pactum Dairy Group, part of the Freedom Foods Group, is riding the wave of China’s growing love affair with dairy beverages. Freedom Foods Group Managing Director, Rory Macleod, explains how.

Collaborative, long-term relationships and lots of research are two of the pillars that have enabled Pactum Dairy Group, which is part of the Freedom Foods Group, to create successful beverage products specifically for South East Asian markets.

One sure measure of the growing wealth and urbanisation of an Asian economy is its consumption of dairy products as a preferred source of calcium and protein. After years of research trips to understand the market and find the right partners, Pactum Dairy Group, which is part of the Freedom Foods Group, is now established as an innovative producer of beverages that meet the tastes and health demands of Asian and Australian markets.

“About five years ago, we started receiving approaches from Chinese companies interested in dairy products,” says Freedom Foods Managing Director, Rory Macleod. “So, along with Tetra Pak, one of our main partners in Australia, we began visiting various regions to meet potential clients and local partners, and generally do our homework.”

“We knew we didn’t want to be a bulk commodity supplier and soon identified value-added dairy beverages as a viable niche with lots of growth potential. It meant dramatically changing our production facilities and methods in Australia, so the investment wasn’t fast or small.”

Preparing for fast growth

To meet the Chinese requirements for quantity, quality and nutrient modification, Pactum Dairy Group moved production from the outskirts of Sydney to Shepparton in the heart of Victoria’s Goulburn Valley dairy country. Placing the production plant close to the dairy herds meant full traceability of their “clean and green” produce was easier to maintain. The fast-growing volume of UHT milk with specific fat and protein levels requested by the Chinese market also led to the group starting intensive dairy farming operations in the area.

“We needed a large, dedicated supply of milk, so it made sense to go intensive,” says Macleod. “We also use smaller, pasture-fed dairy farms to add diversity to our supply chain and help manage risk.”

“Our farmers know we’re building long-term relationships with them and that the longer-term milk supply shortage in China will work to our benefit. In that respect, what works to build confidence in our ability to deliver in China, works just as well with our farmers here.”

Macleod adds that Chinese distributors look for a broad base of features. For example, you need the right level of capital and a broad view of how you can manage and grow in such a large and rapidly developing market.

“We have a strong partnership with Australian Consolidated Milk and Freedom Foods, so they know we can deliver to scale,” says Macleod. “The challenges of longer logistics in Australia were also critical. Post factory, the product has to be shipped so that when the container is opened in China, it’s in pristine condition. It’s a different ball game from delivering a few open pallets to Woolies.”


Developing a reputation for innovative solutions

Macleod explains that Pactum Dairy Group looks for collaborative partners who know their local market and what beverages will work in it. It’s then Pactum’s job to create products that meet those specifications with the company rapidly gaining a reputation as the go-to company for workable solutions.

Whether it’s managing fat or protein content, creating infant formulas, adding flavours to drinking yoghurt or sourcing child-friendly single serve packaging, Pactum’s years of research and investment in farms and production facilities are rapidly paying off.

Since 2013, Pactum Dairy Group has maintained an office in China that keeps a close eye on quality and sales. ‪Macleod envisages that it will generate other business opportunities in the future.

Going forward, Pactum is looking to expand into Vietnam, the Philippines and Singapore, as the Asian love affair with Australian dairy shows no signs of abating.

More from NAB: