What happens when you combine a U.S. dairy manufacturer leading the way in formulating and packaging shelf-stable dairy products and one of the top-six dairy companies in the world by turnover with a global chain that extends to more than 140 countries? The answer is DairiConcepts, a strategic partnership established in 2000 between Dairy Farmers of America (DFA) Inc. and Fonterra Co-operative Group.
According to DairiConcepts President and CEO Jeff Miyake, DFA and Fonterra bring many unique attributes to the joint venture. Headquartered in Kansas City, Mo., DFA is one of the most vertically integrated and future-focused cooperatives in the industry. It is owned by more than 16,000 dairy farmers in 48 states and has more than 3,000 employees. It encompasses one of the country’s most diversified selections of dairy products, food components and ingredients, and continuously breaks ground with cutting-edge technologies. In 2010, it marketed more than 63 billion pounds of milk, and its annual revenues were U.S. $9.8 billion.
Fonterra is a multinational dairy company owned by 11,000 New Zealand dairy farmers. New Zealand has long been known for producing quality milk and, today, is considered the world leader in large-scale milk procurement, processing and management. Fonterra is responsible for more than one-third of international dairy trade. It collects more than 14 billion liters of milk and manufactures and markets more than 2 million metric tons of dairy products annually. Its revenues for fiscal year 2009/2010 were more than U.S. $11 billion.
“The combined value-added businesses of Fonterra and DFA formed the base and focus of DairiConcepts,” Miyake notes. “DFA’s specialty products division produced a lot of dried cheese powders and value-added dairy ingredients. Fonterra produced enzyme-modified cheese and high-flavor cheese components. DFA liked the fact that Fonterra was a global company, and Fonterra liked the fact that DFA was well established in the United States.”
DairiConcepts serves many of the food industry’s most iconic brands. It specializes in high-quality, cost-effective cheese and dairy powders and concentrates, dairy replacers and hard Italian cheeses – block and grated. Its primary focus on dairy is a key competitive advantage, Miyake points out. “This is what we do,” he asserts. “We are solely based on dairy solutions. We are not diluted with divergent food product lines, which differentiates us from our largest competitors.”
Focusing on a niche has worked to its advantage, he adds. The company has grown steadily since its inception, but its growth has been “significantly higher during the last five years,” Miyake says. This is a result of maintaining a “focused business plan and targeting certain markets where we wanted to improve our presence. Certainly, our acquisitions have assisted.”
For instance, last year, DairiConcepts’ acquisition of the hard Italian cheese business from Rochester Cheese extended its reach into this category. “We’re looking for other acquisitions that might add a new technology or capability that we don’t currently have, but it has to fit into our business model,” Miyake remarks. “DFA and Fonterra are both very supportive of us strategically expanding our business.”
Our technical capabilities are a key strength, along with the combination of product development, manufacturing capabilities and creative operations.
Aside from making strategic acquisitions, DairiConcepts has enjoyed significant vertical growth due in part to the extensive technological experience maintained at a staff level and through food scientists working for DFA and Fonterra. The company has nine manufacturing facilities and access to a number of additional domestic plants through DFA.
“Our technical capabilities are a key strength, along with the combination of product development, manufacturing capabilities and creative operations, as well,” Miyake says. “We’re always discovering more efficient ways to do things in addition to developing new and unique offerings.”
One of DairiConcepts’ breakthrough developments is Ascentra™, a sodium-reducing, flavor-enhancing powder ingredient that naturally amplifies the perception of salt. This product originally was developed by Fonterra in New Zealand, and the technology has been successfully transferred to the United States by DairiConcepts.
By enhancing a food’s existing flavors, Ascentra enables the lowering of sodium content while still producing a robust flavor. It is made from a proprietary whole milk-based fermentation process and is rich in potassium, but contains no preservatives, monosodium glutamate (MSG), hydrolyzed vegetable protein (HVP) or yeast extract.
“Ascentra is well-suited for the today’s health-focused environment because it’s a very clean-label product, and consumers have become very label conscious these days,” Miyake says. Aside from lowering sodium content, Ascentra provides opportunities to lower ingredient costs because it can replace expensive ingredients with more economical ones, he adds.
Another cost-reducing ingredient offered by DairiConcepts is its extensive line of Supernatural® Concentrates. “The premise behind concentrates is that you pay twice as much for normal dairy ingredients, but these products will be five times the strength, so the cost in use will be much less,” Miyake says. “Customers looking for economical formulations in recent years have become very interested in concentrates.”
Looking forward, DairiConcepts intends to implement a five-year plan of growing not only by geographic area, but also by market segment.
“It’s not wondering where we are going to go but making sure we get there,” Miyake asserts. “We put our five-year plan together in 2005 and have been extremely fortunate that we have been able to successfully implement those strategies.
“We also predicted that we’d have to go in a different direction once we reached 2010 and have formulated our next five-year plan,” he continues. “It is different from the previous five years, but we are just as excited by seeing where we want to take the company, including continued expansion into international ingredient markets.”