Ornua brings food technology to the Gulf with €20m investment

Ornua, which accounts for 60% of Ireland’s dairy exports, has invested €20m in a state-of-the-art facility in Riyadh to manufacture white cheeses for the Saudi Arabian market. The investment will also give Ornua a solid base to allow it access the growing dairy markets in the Middle East and North Africa.

One of the most interesting parts of this investment is that this will see specialised dairy ingredient powders produced from Irish milk shipped to the middle of the desert to be reconstituted into various white cheeses.

Listen to explanations from the researchers behind the new technology in our podcast below:

The 35,000 sq ft factory with a capacity to make 15,000t of cheese will use pioneering technology developed by Ornua and Teagasc. It will produce a range of fresh white cheeses such as labneh and feta for the bakery sector, retail delis and foodservice customers. The facility also includes an innovation laboratory which will be used to co-develop customised white cheese solutions with customers.

Ornua sees a huge opportunity to go into a very large growing market in the cheese segment. The technology will allow Ornua manufacture and then market high-quality premium white cheeses for the local market but also in time all across the Middle East.

Benefit

The benefit for Irish farmers will be two-fold. It will be a route to value where the profits from the local business will flow back to Irish farmers through Ornua. It will also become a major route to market for Irish dairy ingredients from a number of Irish processors.

It is creating a completely new added-value route to market for the raw material that we produce back home.

Bringing research to life in the Gulf

This is a completely new way of making cheese. It involves taking Irish ingredients and converting them into the end product. The technology underpinning this venture was developed at the Teagasc food research centre, Moorepark. It was brought to life by Ornua as part of an integrated research programme. It marks a new approach to cheese manufacture involving the production of cheeses from reassembled milk without whey coming off as a byproduct. Ornua had the vision to see how this technology was applicable and the technology is under patent.

To get the project to this stage, Ornua built the pilot plant at Moorepark Technology Ltd. The research work was conducted by Ornua and Teagasc teams. The success of the concept came down to a number of factors. Excellent research infrastructure, the pilot plant, the interaction between the research group in Teagasc and vision and commercialism brought by Ornua. These were vital to bring this technology to a scalable point and to customise the products.

Kevin Lane told the Irish Farmers Journal that having a Middle East base allows the company avoid duties, levies and restrictions when importing finished product into these countries. He added that when they spoke to customers, while they wanted a high-quality cheese, they would also show stronger support for a company that was willing to set up locally, become part of the local economy and create employment. He said: “It removes logistical time delays and makes for a seamless supply chain that’s adapted to the needs of local consumers.”

Comment

This is the latest in a series of significant investments by Ornua that targets new routes to market for Irish dairy products. While we hear a lot about companies needing to innovate, this partnership with Teagasc is a great example of how pioneering dairy technologies can create new ways of producing dairy products fit for global markets.

As we expand milk production, markets and investments in regions such as this will become critical. In simple terms the extra production must leave the EU. While Ornua is still optimistic it will continue get growth from its core markets of Germany, the UK and the US, these are only growing at 1-2% per annum. Here, starting from a base of zero, there is huge growth opportunity where consumption is growing in double digits in some markets.

The country

Saudi Arabia is one of the most difficult places on Earth to visit. There are no tourist visas. A few weeks ago the Irish Farmers Journal was lucky enough to get inside this unique country, where women cannot drive, petrol costs 14c/litre and rainfall is less than 80mm per year.

Oil and Saudi Arabia are synonymous, but since the oil price crash, the world’s second largest producer of the product is beginning to feel the pinch. After all, oil makes up more than 80% of the government’s wealth, which is diminishing rapidly as the kingdom faces a deficit of $100bn this year.

However, its relatively large fiscal buffers mean it remains one of the best-placed producers to withstand an oil price rout which has been largely driven by its own policy to ramp up supply to punish higher-cost producers such as US shale.

That said, economic growth, which has been strong over the last 10 years, averaging 3.6% per year, is still expected to come in at 2.7% this year.

With most of its 35m people living in three major cities scattered throughout the desert, the country is vibrant, young and dynamic. In fact, 60% of the population is under the age of 35.

With more women now joining the workforce, there is more disposable income. The market is becoming more sophisticated, but 75% of it is still accounted for by independent retailers.

It is spending more on food every year. Imports are set to double to $49bn by 2020.

A growing cheese market

Saudi Arabia, with an average annual rainfall of just 80mm, might seem an unlikely candidate to be among the world’s top dairy producers supported by a high per-capita consumption of dairy products.

Domestic dairy production is challenged due to the severe climate. Therefore, Saudi is the fifth-largest importer in the world and is growing at 6-8% per annum.

Cheese is a major sector in Saudi Arabia. It is broken down into three categories – white feta (65,000t), labneh (29,000t) and cream (20,000t). It is expected that cheese consumption will grow by more than 60% over the coming years. The cheese market is currently 400,000t per year, valued at €1bn. Almarai has the largest share of the market at 26%.

Local production is based on recombination technology where, in simple terms, powders are recombined with water. While this may seem crazy in a world so conscious of water use efficiency, it could be argued this is a more compelling business proposition that reduces water usage compared with feeding cows to produce milk to turn into cheese.

White cheeses are hugely popular in the region and the new technology developed by Teagasc and Ornua allows milk ingredients to be recombined for fresh white cheese production.

What is Al Wazeen?

Al Wazeen is the company in which Ornua owns a 75% interest. It was established in 2003 and employs 20 people. It is a dairy sales and distribution business that imports fresh cheeses from EU and the US. It is headquartered in Riyadh, with distribution centres in Jeddah and Dammam. It supplies dairy products to foodservice and wholesale customers.