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Fonterra Expands Research Capability to Australia

31 October 2005

Fonterra Expands Research Capability to Australia

Fonterra is to establish a NZ$16 million dairy innovation centre in Melbourne to focus on consumer dairy products, complementing its main research facilities in Palmerston North.

The centre, due to open in April 2007, will employ around 150 people. It will be Fonterra Innovation's second-largest research facility after Palmerston North, which employs more than 300 staff.

Fonterra's Director of Innovation, Bob Major, said that the facility, the first of its kind in Australia, will be an important contributor to Fonterra's new product development resources, which include centres in Mexico, Germany, Malaysia and Chile.

"Fonterra's R&D resources reflect that dairy innovation is key to the success of every part of Fonterra's business and to its ability to grow returns for shareholders," he said.

"We need to invest significantly in innovation for our brands and ingredients businesses to ensure that we remain at the forefront of developing the specialty ingredients and consumer products that will continue to increase our share of the growing global dairy market and our earnings from it."

Mr Major said Fonterra's global research effort reflected the fact that its customer base was also global.

"It is important to have the advantage of being close to our customers and also to the many different consumer trends which drive demand for dairy," said Mr Major.

"Our innovation and product development centres in Melbourne, New Zealand, Latin America, Europe and Asia will ensure our ability to create market-leading products and ensure that Fonterra remains at the forefront of advances in dairy research," he said.

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Fonterra CEO Andrew Ferrier said that the decision to base the consumer innovation centre in Melbourne was largely driven by the needs of Fonterra's consumer business, Fonterra Brands, which is a significant player in the Australian market and also exports to Asia.

"The consumer market demands constant innovation. Fonterra Brands in Melbourne, for example, is constantly developing new consumer dairy products to the extent that this year alone we have introduced at least 60 new products or product variants to supermarket shelves in Australia," he said.

He also said that Melbourne was a natural choice as it is recognised as the food capital of Australia and the region's leading centre for food and nutrition R&D.

"It is a logical choice for us, as a leader in dairy research, to base our consumer product research within this environment where we can also interact with other facilities with shared interests. Melbourne's diverse population also provides us with access to a large multicultural consumer testing environment."

Mr Ferrier said the Melbourne innovation centre will focus on developing innovative products that meet consumers' demand for health and nutrition, convenience and indulgence, characterised by luxury dairy desserts.

"One example of how we are meeting the demand for healthier products is our recent research into the role that lactic acid bacteria play in improved immunity - not to mention the other health benefits that it delivers. As a result, probiotics are now being used in a wide range of consumer products, such as cultured drinks and yoghurt, to better meet specific health needs."

Fonterra's current research network has an established reputation in cheese flavour technologies, protein-based solutions for chilled dairy applications, specialty milk powders for nutritional formulas and specialist ingredients for immune and gastrointestinal health, dermatology, sports health, bone health and animal health.

Mr Major said that dairy was a global growth industry that provided significant opportunities.

"As Fonterra's research expands the boundaries of what we know, it expands dairy's potential, and this presents us with exciting domestic and global growth opportunities," he said.

Mr Major said that Fonterra's innovation centre in Melbourne will work closely with a number of commercial and non-commercial industry bodies on research which will benefit the New Zealand and Australian industries. These groups include the Victorian Department of Primary Industries, Food Science Australia and the Gardiner Foundation.

In making the announcement, Fonterra advised that it has already had fruitful discussions with the Gardiner Foundation regarding its new initiative - the Gardiner Consortium -, which aims to bring together dairy companies, other funders and research organisations to conduct research to benefit the Australasian dairy industry as a whole.

"This research will assist in the development of a common Australasian approach to food assurance, and will further promote the health and nutritional benefits of milk and dairy products," he said.

Fonterra is currently reviewing a number of suitable sites within Melbourne and construction is expected to commence in early 2006.


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