Infant formula and milk powder supplier Wattle Health Australia has entered into a new organic milk joint venture venture that will give it control of production from farm to consumer.
Wattle Health, Organic Dairy Farmers of Australia (ODFA), and Niche Dairy have agreed to form a new company, Corio Bay Dairy Group (CBDG), that will build a $55 million organic spray drying facility at Geelong in Victoria.
ODFA, the largest supplier of fresh organic milk in Australia, will supply CBDG up to 46 million litres of organic milk annually, and Wattle Health has first right to purchase dried products produced by CBDG.
“The joint venture with ODFA has been a long time in the making and is consistent with Wattle Health Australia’s vertical integration strategy, which is very important for the long-term success of the company,” Wattle Health executive chairman Lazarus Karasavvidis said in a statement on Tuesday.
“This also gives Wattle Health the pathway to being a truly Australian organic nutritional dairy company which supports the local dairy industry.”
The spray drying facility will be able to process up to 200,000 litres of fresh organic milk per day.
Wattle Health will have a 45 per cent stake in CBDG, ODFA 50 per cent, and Niche Dairy five per cent.
Niche Dairy is the founding partner of one of Australia’s largest nutritional dairy processing plants, Blend and Pack.
Wattle Health and Niche Dairy will fund the construction of the spray drying facility through loans to CBDG and also provide initial working capital – a total of up to $70 million..
Wattle Health will provide $63 million and Niche Dairy $7 million.
Wattle Health shares remain in a trading halt while the company secures funding for the joint venture.
The shares last traded at $2.26.