Sheepmilk joint venture to expand after it pre-sold first season's production

Spring Sheep Dairy, the sheep milk joint venture half-owned by Landcorp, has pre-sold 95 percent of its first season's production as probiotic powders to Taiwan and is looking to expand its operation next season.

The company produced about 60,000 of its branded 700-gram consumer cans as Spring Sheep comes to the end of its first August-to-March season, using milk from 3000 East Friesian ewes on Wairakei Estate between Taupo and Rotorua. It plans to increase its milking flock to 4000 next season, said chief executive Scottie Chapman, whose boutique international agri-business marketer and investor SLC owns the other half of the joint venture.

Landcorp, New Zealand's largest corporate farmer, wants to move away from being a commodity supplier of agricultural products which are subject to volatile price swings and is eyeing new areas of growth such as sheep and deer milk, as well as inking long-term contracts with customers, and investing in branding to boost the value of its products. The global sheep milk market is estimated to be worth $US8 billion at the farmgate, equating to just 2% of the cow milk market.

Spring Sheep is targeting consumers who are prepared to pay for brands in Asia, which is close to New Zealand and has existing supply infrastructure. Over the next two months, Mr Chapman is taking a selection of the company's potential products including whole milk powder, probiotic powder, calcium tablets, sheep milk tablets and gelato through trade shows across Singapore, Malaysia, Indonesia, Thailand, Vietnam, Japan, Korea and Taiwan.

Not an ingredient player
"I want to work in markets that appreciate quality, that understand value and have a really really good sense of food and quality," Mr Chapman said. "We have started in Taiwan and we are going to Korea next. There are a lot of markets out there. We are not an ingredient player – we are a finished good player – so it's really important that we work in markets where we can relate to the consumers and get insights from them to provide what they require as opposed to just pushing commodities down their throats.

"Everything comes back to demand. If we believe we can sustainably sell it for the long term, we will keep putting on more production. We will make sure we know our markets, we know who it's going to and, once we are confident they are sustainable, we will then put more volume on."

In New Zealand, the company will be testing demand for products such as fresh milk, butter and gelato under its Spring Sheep Milk Co brand.

"We are not going to put a target on how big we want to be, it's actually irrelevant," Mr Chapman said. "We want to create a sustainable business that works and the size will just fall out of that, as opposed to targeting volume because that's when you get caught in supply gluts. As soon as we get more supply than demand, we take away any ability to get premium product.

"We are just going cautiously here until we get a model that works. There may be a bit of an opportunity cost because we undersupply but it means we can hold up demand for a longer period of time and don't get caught in that boom-bust cycle."

(BusinessDesk)