2008 Outlook Conference 1 Building Partnerships for a “Smarter, Uniquely Australian Innovation Process” Paul Ford Geoffrey Gardiner Dairy Foundation [email protected]

2008 Outlook Conference 1

Building Partnerships for a “Smarter, Uniquely Australian Innovation Process”

Paul Ford

Geoffrey Gardiner Dairy Foundation

[email protected]

www.gardinerfoundation.com.au

mailto:[email protected]

http://www.gardinerfoundation.com.au/


The Current View Of Dairy?


Dairy - Farming

9.1 billion litres 2007 – 2008 - 7% drop in milk production

Western Victoria and Gippsland steady, Murray Irrigation down 15% World competitive costs of production Key $1m plus projects

Pastures CRC – Dairy Australia, Gardiner, Meat & Livestock - $1m pa Sub-surface irrigation – DPIV, Melb Uni – three projects $3.6m Robotic milking – Dairy Australia – future farms program


Dairy - Manufacturing

140 processing sites in Victoria, around 15 process 80% of the milk flow Large sites processing 3000 to 5000 tonnes of milk per day Small very innovative plants creating high value fine foods

Key $1m plus projects Closing The Loop – water utilisation / effluent reduction - $1m Smart Drying – cutting costs / energy in producing 600k tonnes powder Dairy Health & Nutrition Consortium - $12.5m over 5 years


Dairy – Major Markets

Markets by tonnage: Australia 395,800 Japan 137,700 Singapore 84,600 Malaysia 64,400 Indonesia 63,650 Philippines 45,600

Australian dairy exports represents 12% of world trade

A$2.5billion per annum North Asia

Rapidly aging Increasingly affluent

Demand exceeds our ability to supply


Dairy People / Dairy Communities

100 000 people work in dairy 50 000 live in small communities of less than 10 000 people Two defining issues

Reducing workforce – dairy’s ability to attract, retain & develop Vibrancy of small dairying communities

Key Projects Cows Create Careers Health of Dairy Communities Volunteerism


Dairy Value Chain - A$14.6bn

Value contributed:

$3.0bnExports

$7.5bnEx-factory

$4.1bnFarmgate

retail

exportmilk production

Out of home eatingDist’nmarketing

processing/manufacturing

Import

feed production

supplements

water

Resource competition Development of water markets allowing

trading of water between different user industries and irrigation systems

Greater competition for feed grains and fodder from other intensive livestock sectors

Increased competition for land, water and cattle has increased options for producers

Dairy farms• About 8000 farm enterprises, dominated

by family farm models• Low-cost production by world standards• Confidence and image threatened by

sustained drought conditions

Domestic retail markets Retailer control of supply chain increasing Growing strength of independent retail

sector Pressure from retailers for brand

consolidation alongside expansion of private label

• Consolidating but expanding food service channels

Trade position Tight supply-demand conditions in the world market

for dairy commodities with supply constraints affecting major exporters

Growing demand from emerging economies in Asia and the Middle East

Improved trade environment with less intervention to support EU and US exporters

Expanded share of global ingredients trade in the hands of fewer major traders

Emerging low-cost exporters gaining market share

Consolidating processing/marketing Fewer owners of dairy facilities through

acquisition Integration of Fonterra operations in

Australia Consolidating brand ownership Restructuring of plant configuration and

factory rationalisation has reduced plant capacity

Contraction of regional milk supplies in NSW and Queensland has meant consolidation of facilities

Dairy’s proposition to consumers

• A platform based on wellness, indulgence and convenience

9.1BL 55%

45%

Milk production • Output falling by 5-7% last 2 seasons• Decline forecast in 2007/08 due to effects of

drought on pasture growth and cost of purchased feed

• Encouraging signs of growth at farm level, offset by effect of exits, and a large % maintaining constant output

Reference: Fresh Logic Report February 2008


Innovation?

Common Terms; innovation, R&D, new etc used interchangeably

USA, Europe and some Australian Science Providers Sequential process R&D, IP protection, commercialisation

Australian Food Manufacturer “Innovation” is a process that draws together two elements;

“R&D” Invent, create a new product, process, technology or service

“Commercialisation” Take the new product, process, technology or service through to a

commercial outcome.


Innovation Demands Shared Strategic Focus

NOW

2015

Innovation Aligned With

Industry / Company Objectives

Priority issues for innovation projects


Innovation - Unique Architecture

From: Christine PittMeat & Livestock Australia

Leadership & Vision

SupportiveCulture

KnowledgeManagement

Creative & Entrepreneurial

Individuals

Enterprise Innovation Capability

Innovation as part of business strategy

Integrative structures

Enabling systems & processes

Metrics


Open Innovation

Henry Chesbrough – University of California Your organisation doesn’t have all the smart people Trusted intermediaries

Building diversity and size your personal network

Building global networks

Forming, managing and disbanding multi-disciplinary project networks on an ongoing basis

Creating uniquely Australian innovation that provides “membership” of a global network


Innovation – The Challenges

Low Private / Public R&D Investment

Food CEO Perception – IP is difficult and expensive to access

Linkages between food companies and science providers not effective


Low Investment In R&D

AustraliaPrivate Investment Australian food companies = 0.3% Sales International Benchmark is closer to 1% Scale is important – US / EU food companies are bigger

Public Investment Australia Agriculture Public R&D investment $US375m

International Competitors USA

John Hopkins, Madison, Cornell, Penn State all invest in excess of US$500m per annum on innovation

US Dept Ag Agricultural Research Service > US$1Bn pa EU

6th Framework R&D Funding


Intellectual Property

IP Australia - Part of Department Of Innovation Industry Science & Research By encouraging increased innovation, investment and trade through the effective use of

IP, IP Australia is making it possible for Australian businesses to establish and maintain globally competitive positions.

Food Company Executives See Science providers as double dipping

Tax payer and farmer levies paying for fundamental science; Then asked to pay again for IP

IP Agreements seen as very complex and with huge lead times to negotiate See IP developed within a project as “owned” by the company


Linkages No strong networks or linkages

Between science providers and food companies Links between management functions of marketing, R&D, production,

finance, process engineering

R&D and Commercialisation Processes Basically the US or European R&D model Two separate and sequential steps Food companies see:

Elegant science, not: Elegant AND relevant science


What’s Needed? Recognition that Dairy/Food is a defining, sustainable industry

supporting the Australian economy and rural communities

We need to develop a smart “Uniquely Australian” food innovation process

Dairy/Food Innovation Centre


Industry Recognition

Dairy

$14.6bn per annum value chain

Exports - $2.5bn

8 major companies 6500 SME suppliers

100 000 people 60 000 in small regional

communities of <10 000 people

Vehicle Manufacture

$15bn per annum value chain

Exports - $4.85bn

4 major companies 200 large component suppliers

70 000 people Concentrated Melbourne /

Adelaide


Smarter Dairy Innovation Consolidates five dairy industry

Centre’s in one entity

Based in Werribee Food Research Precinct

Membership Eight dairy companies representing

85% Australia’s milk Dairy Australia, Gardiner

Foundation

$7m per annum Larger dairy companies investing

$900k pa membership

Structure Company limited by guarantee Industry drives Board / strategy


Dairy Health & Nutrition Consortium

$12.5m of new investment over next 5 years $5m Gardiner Foundation - $7.5m by dairy companies

Seven Victorian dairy companies participating

Builds capability in science that underpins label claims

Capability building / Company specific projects supported by 1:2 funding

Links to Global Dairy Platform


2008 and Beyond………..

Operating Environment:

Faster communication = global networks Central R&D laboratories are dead Innovation projects will be completed by global project teams Multi disciplined project teams will be created, managed and

disbanded on an as required basis

Limited funds for innovation investment

Australia needs smarter innovation processes Pre-competitive innovation projects have huge leverage

Evolving Federal/State Government initiatives


Agrifood / Dairy Innovation Centre Created as part of the new Federal Government Innovation initiative

A partnership between Government, Food Companies and Science Providers

Key Components Investment in Capability

Develop smarter, uniquely Australian innovation processes Food Science Australia, CSIRO, Universities Build global networks Collate agri-food market demographics, market access

functions Innovation Grants

Demonstrate best practice innovation Build linkages between food companies and providers


Geoffrey Gardiner Dairy Foundation

Level 1, 84 William Street

Melbourne Victoria 3152

Australia

Phone: +613 9606 1900

Website: www.gardinerfoundation.com.au

http://www.gardinerfoundation.com.au/

Documents

2008 Outlook Conference 1 Building Partnerships for a “Smarter, Uniquely Australian Innovation Process” Paul Ford Geoffrey Gardiner Dairy Foundation [email protected]