A group of Chinese companies is rolling out more premium UHT milk and planning a new "fashion milk" from its 29 New Zealand farms, almost entirely for the Chinese market.
The company's fresh milk, produced with Green Valley Dairies, already arrives on the shelves of 18 Alibaba Hema Fresh supermarkets in Shanghai a few days after it is produced in New Zealand.
Milk New Zealand Dairy, the export arm of Alibaba majority owned Theland New Cloud, has yet to draw up a launch plan for the new product.
Manufacturing partnerships have been developed with Fonterra, Synlait, Miraka and Westland Milk Products and others. Theland Farm Group run the farms for the Chinese.
Theland Farm Group agribusiness chief executive Justine Kidd said the partnerships had helped it gain more value for milk in the marketplace to make farmers more profitable. The farms were the company's brands and Chinese identified with their clean air, food safety and free range farming.
She said co-operative and contract dairying were the two models in New Zealand dairying yet farmers getting $5-$6 a kilogram of milk solids over many years were only breaking even, paying bills and interest.
"I really think that if we stick with only co-operative and only contract there is a high risk the majority of us will remain price takers," said Kidd speaking at the Future Farms conference in Palmerston North on Wednesday.
"But if we can shift ourselves into partnership models ... from owning everything equals success to actually recognising there is talent in different parts of our supply chain that if we can partner with we can create more success."
Value in the future will be created on the farm with specialty milks such as high protein products, A2 milk, organic and jersey cow milk and milk with some nutritional differences, she said.
"The reality is that [the] numbers tell us that we have not got a sustainable business model. We are not profitable enough to be sustainable going forward with the challenges [talked about in the conference] yesterday in terms of increasing compliance, increasing environmental management, nutrient limitations and probably reduced productivity."
She said the company still operated like a start-up after more than five years and had yet to crack its strategy but was making progress with partnering with New Zealand based manufacturers to create products wanted by customers and distributing them to the market, and looking to a future model that will enable farmers to share the rewards.
She said there was no real focus on supplying milk products to New Zealand, and apart from a Hamilton store it was distributed to China.
The 25 dairy farms and four drystock farms on 12,000 hectares produce 10 million kilograms of milksolids from 26,000 cows with another 5500 young stock on the properties,
They include 16 of the former Crafar farms in the central North Island bought in 2012, now known as the Tahi Farm Group, and 13 farms in the South Island known as Purata Farming. Over the past four years the companies has invested $30m in improving the farms.
A 57 per cent shareholder in Theland New Cloud since December is Alibaba Group Holding, founded by China's richest man Jack Ma, and his capital venture firm.
Its export arm delivers a range of UHT milk products including deluxe UHT products containing more protein and deluxe powders containing mānuka honey and lactoferrin. A lactoferrin product focusing on immunity support for younger people has just been launched. By last year it had milk products in 25 provinces of China and 4700 stores.
Kidd said its UHT milk was a great example of partnerships and it worked with Miraka to enable the building of their UHT factory in 2014 through a contract taking all of the UHT milk product.
Last week a UHT product was launched with four grams of protein that is being produced with Westland.
Yet to go on the shelves was a "fashion milk", said Kidd.
"I find this concept of fashion milk quite fascinating. I'm looking forward to what this is going to be and how we are going to launch that. It should be a fun campaign."
Last year the export arm began exporting fresh milk via Alibaba's online Tmall platform, which has about 15 million members in the Yangtze River Delta. Since September, 154,000 litres has been exported. The Hema Fresh supermarkets combine internet and technology powered shopping through a mobile app for home deliveries and payments.
When the fresh milk was launched 10 key opinion leaders, some of them "Kardashian famous" who blog with millions of followers using WeChat were brought to a farm and their reaction to the milk was livestreamed back to China. Within an hour of going live there were 50,000 orders for milk by Alibaba's VVIP members in one of its most successful online launches.
Kidd said the export arm was unlike most businesses, selling products wholesale to supermarkets which added a margin and sold it on.
"We are in a profit share arrangement so we don't sell the product to the supermarket. It's put on their shelves and they sell it and share in the profit of that. It's believed that this has been foundational in [our] rate of growth in getting into that many [Chinese] stores."
In 1300 of the stores the export arm has a salesperson exclusively selling its products.