Words by: Elaine Fisher
Despite disruptions caused by Covid-19, and a drier than normal summer, 2019/20 was a great season for Tatua dairy farmer shareholders, who produced more milk than the previous season, supplying 15.15 million kilograms of milksolids.
The company achieved record revenue and earnings resulting in a cash payout to shareholders of $8.70/kgMS after an earnings retention for reinvestment of $1.26/kg MS.
Brendhan Greaney, Tatua chief executive says that while the payouts from different dairy companies are compared each year; “the comparison is not apples-for-apples” and can be misleading.
“Each of the processors have different ownership models. We are a co-operative, owned by our farmer suppliers and there is a cost of entry by way of shares and supply rights.
Our payout to our shareholders is a distribution of total earnings less any earnings retained for reinvestment – simplistically, a return to our shareholders for their milk and investment in the company.
“Other non-co-op processors may have a lower payout, but there is no cost of entry, the farmers supply milk, but are not the owners.”
Among the keys to success for the company, founded in 1914, is that it operates in highly specialised, higher-value segments of the market, in areas and at a scale potentially less attractive to larger companies.
“Around half of our business is what we refer to as added-value. This includes a wide range of products, some very specialised, into a number of market segments. These are more complex to manufacture, but are also higher returning and tend to be more stable in pricing. Many of our value-add products have been in development for years and are typically customer specific.”
That process needs patience, not just for the time and effort involved in development, but also from shareholders, who understand and support the company’s focus on diversifying away from reliance on bulk ingredient commodity-type products.
However, Tatua’s bulk ingredient business of caseinate, whey protein concentrate (WPC) and anhydrous milk fat (AMF) remains a very important part of its business – albeit more exposed to fluctuations in global commodity pricing.
Value-added products are produced on-site in high-tech FSSC 22000 Q certified facilities (FSSC is an international Food Safety Management Certification Scheme). These include dairy and non-dairy protein ingredient powders for various nutritional applications, and even base ingredients used in the manufacture of biopharmaceutical and biopesticide products. Cream-based consumer and foodservice products are also produced at the Tatuanui site.
The company has a responsible farming programme called Tatua 360 which is made up of five core elements: environment, animals, food safety, people, and infrastructure performance.
The programme provides a framework against which farmers can measure their performance, and assists in ensuring that they meet the expectations of Tatua customers, regulators, and the wider community.
Farmers are audited annually against standards in each of the five Tatua 360 elements. If any actions are identified as a result of the audit, there is a process for these to be followed up and resolved.
“We believe that all of our shareholders need to commit to meeting our standards, not just those who choose to, so we don’t offer premium payments for doing the right thing. Instead, shareholders are supported to achieve all of the Tatua 360 requirements,” says Brendhan. The only quality payment Tatua offers is linked to somatic cell counts.
“Rather than having a tiered system that differentiates within our supply base, we have a strong focus on communicating why a change in practice is needed, and providing the tools to support the change. This allows all of our shareholders to support each other and move together with us,” he says.
