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CoBank report evaluates dairy joint venture opportunities

In 2017, many U.S. dairy companies and international partners collaborated to capitalize on each other’s strengths.

Dairy companies across the U.S. are looking to capitalize on increasing milk production through international joint ventures with companies that have significant manufacturing, networking and marketing expertise, according to a new report from CoBank’s Knowledge Exchange Division.

While the U.S. has heavily invested in milk production, Europe and other regions that faced production constraints focused their effort and investment on technology for the processing sector. In 2017, many U.S. dairy companies and international partners collaborated to capitalize on each other’s strengths. 

“The international dairy industry sees the U.S. milk supply as strong and reliable and they see opportunity in the U.S. consumer,” said Ben Laine, industry analyst with CoBank. 

Many cooperatives lack the available capital to take on new and costly processing facilities -- a cheese manufacturing plant can cost between $300 million to $500 million -- while many international processors see the possibility of diversifying their offerings both in the U.S. and globally. 

“There are many benefits to this model as the partners in these joint ventures will share start-up costs and reduce the risks and costs along the supply chain,” said Laine.  “These new plants are also benefiting producers, as the additional capacity reduces transport distances.” 

However, once these ventures are in place, there is still plenty of risk, according to Laine. For example, the market risk that a new product may not meet sales expectations still exists, and if sales targets are not met, there may be pressure from some partners to exit. 

Source: CoBank

 

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