Amid all the post-milk quota hoopla, there is one firm whose production ambition would barely stretch to a bowl of cornflakes.
US start-up Muufri may be sitting on the biggest dairy market disruptor in decades, however – milk, but without the cow or the carbon footprint. The company has worked out a relatively cost-effective way of synthesising milk in the lab.
The process uses bioengineered yeast to produce real milk protein. This is done by adding cow DNA to yeast cells, which are then combined in vats with fatty acids and water to produce milk.
The product is no milk substitute either; it is said to taste exactly like the real thing. The ingredients can also be tweaked to be lower in cholesterol or lactose-free, a significant marketing potential in today’s fat-conscious marketplace.
Muufri, which recently availed of an accelerator programme for start-ups in Cork, is currently perfecting a final prototype, with a plan to go to market in 2017. When it hits the shelves, the product is expected to cost twice the price of normal milk.
Its milk is just one of a string of synthetic or value-added dairy products being developed for the global market. Population growth; rising disposable income; more women in the workforce; urbanisation; the adoption of Western dietary habits are all fuelling strong demand for dairy across Asia, Africa and the Middle East.
Rabobank predicts global demand will eclipse supply by 25 billion litres by 2020 – a trade gap that exporting countries, like Ireland, will be keen to exploit. Instead of traditional dairy staples like liquid milk, butter and cheese, however, consumers in emerging markets are buying powdered milk products which go into making infant formula and protein drinks. An estimated 90 per cent of the investment announced by companies in the wake of the lifting of Europe's long-standing milk quota regime has been in processing facilities geared towards powdered milk production.
Cavan-based Lakeland Dairies, the State's second largest co-op, recently started construction on a third milk powder-processing facility at its main Bailieboro campus, which will be the biggest in the State when operational.
Glanbia’s new dairy processing facility at Belview, Co Kilkenny, which opened in March, is almost entirely intended for powder production.
At the centre of this "white gold rush" is China, which consumes nearly two-thirds of the world's supply. Although the lion's share goes into infant formula, there has been a proliferation of dairy drinks and related protein products.
Coke’s rather ridiculously named Pulpy Super Milky – a mixture of fruit juice, milk powder and coconut chunks – recently became the first billion- dollar brand to emerge out of China.
"There's an increasing trend towards premiumisation of commodities with the dairy industry," says Dr Mark Fenelon, head of food research with Teagasc.
Nutritional value
In other words, firms are adding value to the original commodity by increasing its nutritional value through the addition of vitamins and/or mineral blends, other nutrients and/or improving functionality on reconstitution in formulated beverages, such as drinks for the young and elderly.
Adding value to basic commodities can also insulate producers from price volatility, which looks set to be increasingly common feature of the post-quota era.
Another evolutionary branch of this new trade is what is loosely referred to as “smart ingredients”.
The most obvious way to ship Irish dairy to distant markets is in dehydrated (spray dried) form, Dr Fenelon says.
The ingredients therefore must be designed with specific rehydration properties to allow them to be reconstituted as say, cheese or yogurt, and impart the traditional nutritional and physical qualities of these products. This involves a bit of chemistry.
The Irish Dairy Board (IDB) recently invested €20 million in a state-of-the-art cheese manufacturing plant in Riyadh, Saudi Arabia. The plant will utilise ingredient technology developed in conjunction with Teagasc scientists to reconstitute fresh cheeses for the Saudi market.
The technology allows innovative milk protein ingredients to be recombined for fresh white cheese production.
It is anticipated that the Irish Dairy Board will use Saudi Arabia as a manufacturing hub for the region, supplying the fast- growing Islamic Halal market.
Saudi Arabia already imports more than 400,000 tonnes of dairy produce a year, with domestic milk self-sufficiency remaining relatively low due to the lack of water for crop growing as animal feed.
In mature dairy markets, fortified milks appear to be bucking the trend of falling liquid dairy sales.
In the US, where milk sales are down 8 per cent in the past decade and more than half of adults do not even drink milk, Coca-Cola has launched its own brand of milk, Fairlife.
The joint venture with US dairy farmers utilises a special filtering process which allows sugar content to be taken down significantly or various nutrient contents to be enhanced. Coca-Cola is selling it as a premium product for twice the price of normal milk.
In Ireland, Avonmore’s Super Milk is fortified with vitamins B, D, E, folic acid and calcium – nutrients, which the manufacturer claims, of which the Irish population has an inadequate intake.
Increasingly, these products are being marketed to young people and sports enthusiasts as products to enhance or repair damaged muscles, essentially as part of their fitness regimen. Because protein builds muscle, high-protein milks are also being sold to the elderly as a means to maintain muscle mass.
Dr Fenelon says “stage nutrition” – targeting nutritional profiles for different stages in life from the infant to the elderly – is another developing feature of the modern dairy trade.
Related to all of this is the whey explosion.
Until relatively recently, whey – the byproduct of cheese-making – was discarded as a waste product. Dairy firms even paid other companies to come and take it off their hands. In Ireland, it was usually fed to pigs.
This was before someone realised its potential as sports nutritional product.
The demand for these products in Europe and the US – where overall dairy demand, with the exception of cheese, has plateaued – is soaring.
Whey protein
A case in point is
Glanbia
. The company is now a world leader in producing whey protein products, commanding the biggest individual slice of the lucrative US market, and its sports nutritional business is now a primary focus.
In China, the relaxation of its one-child policy, the melamine poisoning scandal of 2008 and the rise of an affluent middle class have fuelled runaway demand for powdered milk. However, a growing concern about low breast-feeding rates poses a threat to the powder boom.
Swiss-based Nestlé suffered a boycott of its products in the US and Europe in the late 1970s and early 1980s, prompted by concerns over its “aggressive marketing” of breast milk substitutes.
All told, the demand for dairy looks likely to remain strong for some time to come. However, how we consume it is less predictable and that is where innovation looks likely to thrive.
