Keytone Dairy makes its move into China and South East Asian milk fat markets

Keytone Dairy Corporation ASX KTD KeyDairy China anhydrous milk fat
Taiwan bakery ingredient supplier Tehmag Foods Corporation has ordered NZ$268,000 worth of Keytone Dairy Corporation's KeyDairy anhydrous milk fat products for distribution throughout South East Asia and China.

Keytone Dairy Corporation (ASX: KTD) has launched its first “wet” dairy product into global markets including China and South East Asia – two of the world’s fastest-growing consumer markets that are currently hoovering up tonnes of produce from countries such as Australia and New Zealand.

The manufacturer and exporter of dairy and nutrition blended products listed on the ASX last week at A$0.20 per share after raising A$15 million. Since last week, its shares have traded as high as A$0.385.

The surge into China’s dairy market was also something at the top of Wattle Health’s (ASX: WHA) priority list today. The company announced its own Chinese ambitions after receiving approval for general trade in China.

Keytone began production of powdered milk in 2013 and, having expanded production, the company now manufactures whole and skim milk powder products under its own brands and powdered milk products for a range of other private labels.

Keytone says it has successfully launched its KeyDairy anhydrous milk fat (AMF) “wet” product (and recorded its first sale order) which thereby validates the company’s “four-pillar growth strategy” including an expanded product range, recalibrated production and wider distribution.

KeyDairy was developed during months of arduous work with Keytone using test samples to gauge product quality and customer satisfaction.

In today’s announcement, the company said it had also received its first customer order for KeyDairy totalling NZ$268,000 from Taiwan-based Tehmag Foods Corporation. Currently, Tehmag is Taiwan’s leading supplier of bakery ingredients with Keytone saying that the order is due for shipment in August 2018.

Tehmag has offices throughout China and South East Asia and distributes its products via 12 verticals and works with more than 35 brand partners, now including Keytone Dairy.

Furthermore, in order to fulfil its new order Keytone has confirmed that its existing manufacturing facilities are geared for the production of “dry” products only. Keytone Dairy is utilising its brand and marketing channels for other synergetic products and recently entered into an outsourced manufacturing and packing contract for the AMF product range with Bakels Edible Oils, NZ’s largest supplier of edible oils.

Under this agreement, Bakels will guarantee the company a minimum supply of up to 400 tonnes of the product over the next 12 months. Keytone Dairy has not, however, committed to a minimum order level.

Anhydrous milk fat market

AMF contains at least 99.9% milk fat and only requires “ambient” storage. This makes it more convenient and cost-effective than equivalent butter products that require cold storage – thereby making it ideal for the logistics of food service users.

Traditionally this product has been used for butter making or exporting to bulk industrial manufacturers but with consistent product development, changing consumer preferences and pressing logistical factors, things have changed.

With the rapid growth of bakery and food and hotel services in Asia, the demand for smaller packs of AMF is expanding, as the product doesn’t require cold storage and is light enough for individual handling without the use of specialised equipment. Already well-known in India and the Middle East, AMF is meeting growing acceptance in the bakery industry in China, Hong Kong and Taiwan because of its flavour in pastry and cake making.

According to a study conducted by IMARC earlier this year, the AMF market grew at a CAGR of 4.7% between 2010 and 2017, reaching US$2.6 billion last year.

The study concluded that some of the key factors driving this demand include ease of transportation and storage, flourishing food manufacturing industry, population growth, increasing disposable incomes, changing dietary habits and rising demand from developing markets.

When it comes to commercial markets, the top global markets for AMF are currently China, South East Asia, Mexico, the Middle East, India and the US.

About Keytone Dairy

Based in Sydney, Australia and Christchurch, NZ, Keytone is an established manufacturer and exporter of formulated dairy products.

In addition to its own brands, the company is a trusted production and contract packing partner for well-known brands in NZ and internationally.

Keytone’s purpose-built dairy production facility offers a wide range of dairy and nutrition packing solutions, meeting the diverse needs of consumers from different markets and cultures.

The company’s facility is certified with the NZ Ministry of Primary Industries, and Keytone holds a Certification and Accreditation Administration (CNCA) in China thereby enabling export of its products into Asia.

By mid-afternoon trade, Keytone’s share price was up almost 9% to A$0.365.

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