Dairy Crest buys out prebiotic joint venture partner for £6M

The dairy giant company has purchased the rest of the Promovita Ingredients venture, which makes lactose-based prebiotic galacto­-oligosaccharide (GOS). 

Promovita was established as a 50/50 joint venture with dairy sales company Fayrefield Foods, which supplied the necessary enzyme to develop GOS. 

GOS will go on sale next year after Dairy Crest completes a £20M investment to manufacture the prebiotic at its cheese making factory in Davidstow, Cornwall. 

‘Added-value ingredients’ 

Dairy Crest chief executive Mark Allen said: “This is a further important step in the evolution of our added-value ingredients business. 

“We remain on track to begin commercial production of GOS in early 2016 and this acquisition gives us full control over the development of this exciting business.” 

As well as investing in GOS, Dairy Crest is making a £45M investment in manufacturing capabilities to produce demineralised whey (DW) at its Davidstow site.   

The company has a strategic partnership with Fonterra which will market and sell the two products for the fast growing global infant formula market. 

‘Stream of long-term earnings’ 

Last month Shore Capital analysts Clive Black and Darren Shirley said the investment at Davidstow in GOS and DW would lead to a “high quality stream of long-term earnings”.

“Indeed, the decision by the Chinese government to change its one child per family policy to two children can only be seen as strategically good news for the global infant formula market that Dairy Crest is about to enter,” Black and Shirley said. 

Meanwhile, the sale of Dairy Crest’s troubled dairies to Müller for £80M is due to complete on Boxing Day this week.

Dairy Crest expects to issue an interim management statement for the nine months to the end of this year on 11 February 11 2016.