If you yearn for the days of whole milk in cold glass bottles with cream clotted at the top of the bottle neck, Tahi’s newest investment may wholeheartedly appeal to you.
With agriculture being one of New Zealand’s top primary industries and largest export sector, Grasslands has provided Tahi with an excellent opportunity to gain entry into the sector, adding a dairy farming dynamic to the fund, further diversifying its holdings.
With branches in both New Zealand and the United States, Grasslands features exciting growth opportunities for the industry – and investors – whilst providing geographic diversity, which is especially advantageous for a business exposed to seasonal and weather variations.
Grasslands has a milking herd of approximately 14,200 cows across 2,700 hectares of farmland in Canterbury, and 3,400 in Southland. Specialising in progressive pasture-based, holistic dairy farming, it has strategically chosen these farm locations for their high levels of operational efficiencies and rich natural resources. These farming hubs have rolled out a scalable business and staff development model, providing an excellent base for Grasslands to continue its growth.
With strong relationships already in place with Fonterra and Synlait, to whom Grasslands sells almost 100% of its New Zealand-produced milk solids, this part of the business is expected to continue to provide lower volatility cash generation and scale benefits that have seen New Zealand become a major producer of high-quality commodity dairy products, and the largest supplier of the world’s traded dairy products.
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Grasslands’ American arm of the business has stood out in the US market due to Grasslands’ innovative holistic approach to dairy farming (which may not seem too unusual to Kiwis but has flown in the face of traditional American dairy practices). These US dairy farms have further enabled Grasslands to introduce and exclusively supply its products to market, with the creation of a premium boutique US domestic brand called Zeal Creamery, which sells milk and butter.
The US operations are pasture-based dairy farms, much like they are in New Zealand, essentially encompassing and applying the Kiwi ‘know how’ within its practices. Grasslands’ holistic approach is unique to the US dairy industry, making Zeal the only scalable domestic US brand offering certified animal welfare standards with 365-day free-range, pasture-raised herds and 100% A2 proteins.
Initially, whilst Grasslands’ pasture-based model resulted in this measurably differentiated milk, it had previously been sold into generic retail pools, featuring alongside dairy products born of the conventional US milk production model – grain or corn-fed herds, typically, housed in a barn or confined setting.
While these American dairy farming practices may have a competitive price edge, there is a rapidly growing buyer awareness around the provenance of premium, sustainably and naturally produced food products. The launch of the Zeal brand has given Grasslands’ US operations access to this niche but fast-growing market segment, where quality and best practice is key, and has allowed Grasslands to access a channel to customers that appreciate and are willing to pay for grass-fed, non-GMO, fresh (versus longer-life) dairy products.
With more than 20 percent year-on-year growth in grass-fed and specialty milk categories in the US, there is an increasing demand for Grasslands’ quality dairy products, and product innovation is continuing with the recent launch of probiotic fresh milk with the existing Zeal attributes. Zeal has already established strong retailer support from leading natural grocery brands and premium independent grocers, which has placed Grasslands and the Zeal brand in a strong position for future success.
This Tahi investment is helmed by an impressive board and management team across both Grasslands and Zeal. The Grasslands board is chaired by Mark Townshend, an early director of Fonterra, and the Zeal board is chairedby Mark Weldon, well known as the former CEO of NZX limited.
With a strong core business and proven track record of profitability, matched with a world of growth opportunities in a developing market, Grassland’s potential is compelling and exciting.
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This blog has been produced for investors in the Booster KiwiSaver Scheme, Booster Investment Scheme and the Booster SuperScheme (together ‘Schemes’). The intent of this Blog is to provide informative information about the Tahi Limited Partnership’s investments of which these Schemes investment funds have an investment allocation to.