Back in the 90’s early 2000’s I found myself at the BHP training centre in Victoria. I was there as part of an in house training thing for some consulting group that I worked at for a while. The point is – there was a swimming pool and the NZ team cleaned up. That shouldn’t have happened but it did because we surprised the Aussies. We defied expectations and won the race.

At the time I used to swim 1-2km every day in my local pool as part of my slackers tri routine which involved walking and cycling too. I was never the fastest swimmer but I was motivated. We took control of the training programme by adding a new unscripted activity.

The training session was one of those predictable corporate things where fully grown adults had to compete to get different coloured blocks to complete a lego tower or some such thing. The memory of suited managers diving across the space to get more red blocks sticks in my mind.

It was a visceral illustration of how much of management is really just competition for resources both internally and externally. Dear reader – I was a management consultant – no puns intended but there were many. Looking back it was a bizarre spectacle. Some 25 years later I choose to remember the swimming comp which wasn’t part of the official gig but it tapped into the vibe of the thing perfectly.

I could see where the trainers were taking us so I proposed a swimming competition if we could finish some other exercises early and we did it. Yes  – despite Australia doing ridiculously well in every sports competition for years the NZ team won this time because we  subverted the training workshop and changed the script. I’m sure the internal memos were hilarious afterwards but honestly the politics of management is mostly theatre and we understood that at the time.

Back in the day ( for MBA classes) we used to ask questions like ‘what business are we really in?” (cliche but still true). “What is our competitive advantage” and so on. I mention this because I now live in Otago and see the downside effects of excessive dairy farming on the countryside.

We continue to produce high quality dairy product and then insist on turning it into low value commodity ingredients which is ripe for disruption. The Dairy sector is hugely important to NZ but it is likely that the stakeholders in that industry are so defensive and reluctant to engage with the core issues that they miss the boat entirely.

In a related aside, my first mobile phone was a Nokia and so was my second and third too. Later on I had a Sony Ericsson and so on. But when smartphones came along I got an iPhone early in the piece after testing an iTouch ipod which did most of the same things. The point was that the incumbents missed the opportunities in that industry so that Apple and Google cleaned up. The same thing could happen to Fonterra. Very few even remember Nokia or the Sony phones now they were eclipsed.

I studied the pre- Fonterra dairy industry in Nz back in the early 90’s. We need the equivalent of a Bay Milk style company (now) that can innovate with precision protein and come up with a way that the NZ dairy sector can access more premium markets. More than 95% of NZ’s dairy is converted to commodity style products and there is no defensible future in that at all.

Scientists find new way to make cow’s milk substitute, could have radical effect on New Zealand’s dairy industry

The way to win the race is to be ahead of the game and to understand what is at stake and to plan pro-actively. Precision fermentation is going to impact the NZ dairy sector in a huge way. We need to see it as an opportunity in much the same way that winemakers in the 90’s used the cheap stainless steel vats from the dairy sector to set up wineries and to create premium brands and products.

A local story that I love about brand leverage is Giesens Strange Nature gin. Giesens sell a few de-alcoholised wines. They take that alcohol ( a waste product) and then distill it into a high end gin which they then sell for a premium. It’s a grape based gin which is unusual in itself. Last year I was lucky enough to have a tasting of a number of the main category gins and Strange Nature. Compared to Strange Nature the others seemed like paint stripper but if you have never tried Strange Nature you wouldn’t know it could be so much much better. It redefines the product category.

In some way the NZ dairy sector needs to re-think what it can do with all of the infrastructure and IP that the industry has. Maybe it is just the land. Maybe mushrooms are a good feedstock for precision fermentation and all those milk vats are useful in a different configuration. Maybe there is a waste product that can be turned into the equivalent of a Strange Nature gin – I don’t know the full answer but getting ahead of the game and setting up some projects to test out new products and new product innovations is a start.

Fonterra expects to put non-dairy protein on the market next year.

“Fonterra took its first step into non-dairy products last year when it invested in a start-up company along with DSM, a global nutrition and bioscience company, to develop non-dairy proteins using precision fermentation.

The two companies then formed Vivici, which was tasked to develop and market fermented nature equivalent dairy proteins….

New Zealand Food Safety deputy director-general Vincent Arbuckle said dairy proteins produced by precision fermentation would already be covered by existing standards in the Australia New Zealand Food Standards Code.”

Those Australian management consultants didn’t know that a bunch of kiwis were going to beat them in a swimming race because we got there first – set up the competition and picked the format – all those steps gave us an advantage. It is a tenuous analogy but just like the Strange Nature product concept. We need NZ Dairy to come up with the equivalent of a Strange Nature gin – a higher value product category extension or something as well as scaling and downsizing the parts of the industry that don’t work in the longer term.

Maybe plant based protein is the way forward such as what Leaft Foods are working on.

Our modelling suggests that producing Rubisco protein directly from leafy crops has a 10x lower carbon footprint per hectare than conventional dairy protein”

One of the founders of Leaft is John Penno who was a former CEO of Synlait. Given the $b size of the NZ dairy sector it is a giant opportunity to explore new food / ingredient categories for export. Like other projects I have mentioned before Leaft could be one of the game changers but when billions are at stake it needs some bold thinking.

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