Case Study Synlait Milk is an innovative dairy processing co

Case Study Synlait Milk is an innovative dairy processing company that has experienced remarkable growth in a tough dairying environment. Since beginning manufacturing operations in 2008 Synlait Milk based in mid-Canterbury has grown its revenue to $759 million, its supply base to more than 200 farms and its staff to more than 550 people. Synlait Milk has performed very well on the back of global demand for safe, reliable, protein-rich foods. The company processes more than 700 litres of milk a year to produce a range of infant and adult nutritional milk products that it exports to more than 40 countries (Synlait, n.d.). Synlait was created by dairy farmers Barry Dingle and Juliet MacLean in partnership with John Penno, a senior scientist at Dexcel, the dairy industry’s research centre. Rather than supplying skimmed milk powder to Fonterra the trio were looking for ways to increase the value of the milk they produced. In particular, they were keen to develop innovative added-value milk products. Their vision was to build Synlait into a “major supplier of high-value, hightechnology ‘milk components’ to food producers worldwide.” (Oram, 2006). Synlait began in 2000 as a corporate farming business with the purchase of Robindale farm, one of the largest farms in New Zealand. By 2005 Synlait owned eight farms and in 2006 the decision was made to establish a manufacturing plant to produce innovative milk products. A growing customer base and considerable resources in milk powder production resulted in early growth for the company. As Synlait moved beyond ingredients manufacture to becoming a significant global supplier of infant nutritional products, Bright Dairy of China became a significant shareholder in 2010 (NZ Herald, 2010). To date Synlait’s strategy has focused exclusively on manufacture by selling select products to leading global food companies that own strong brands (Skellern, 2016). Alongside world-class processing facilities, Synlait Milk has established strong relationships with key players across the entire value chain including milk suppliers, market distributers and key customers, such as A2 Milk Company. Two key planks of Synlait’s strategy are its differentiated milk supply and its manufacturing excellence. Firstly, Synlait differentiates its product at the production stage through breeding and feeding technologies. This enables it to produce products that satisfy individual customer requirements. Secondly, Synlait’s specialist manufacturing facility allows flexibility to meet a range of individual customer specifications. Synlait listed in 2013 on the NZ stock exchange (Berry, 2013) and has experienced impressive growth, recording a net profit after tax of $38.2 million in 2017 up from 34.4 million in 2016. Synlait won the Deloitte Top 200 Best growth strategy for 2016. In 2016 Synlait announced plans to raise $98 million for a $300m expansion programme over the next three years including increasing its infant formula manufacturing and expanding manufacturing facilities with a second site (Cronshaw, 2016).

Explain the different strategic directions available for Synlait Milk using the Ansoff matrix. What should the future strategy be? .

Discuss Synlait Milk’s internationalisation strategy addressing the following questions:What are the key drivers for Synlait’s international strategy? Which market(s) does Synlait Milk prioritise and why? How has Synlait Milk expanded into international markets? What international strategies and modes of entry has the company used?

Sunject strategic management

Solution

The different strategic directions available for Synlait as per Ansoff matrix are market development, diversification, market penetration and Product development. Market development Synlait can expand into new markets identifying the target customers. By using market penetration, Synlait can expand in the current market with the existing customers by selling product to more customers and adopting strategies that would help to gain the attention of new customers. Using product development, Synlait can offer new product variants other than adult and infant nutritional products and developing products that relates to the existing products. Diversification strategy involves developing and selling new products new customers. In my opinion as Synlait is focused on developing innovative value added milk products, they can adopt product development and develop different variants of existing product. Developing other milk related products also would help to expand the market and Synlait can use their current reputation for the marketing of new variants in the diary industry.

Synlait Milk processes more than 700 liters of milk a year to produce infant and adult nutritional products and exports to more than 40 countries. The key driver for Synlait’s international strategy was its vision to build Synlait into a major supplier of high value high technology milk components to food producers worldwide. The strategy of Synlait focused on manufacture by selling select products to leading global food companies that own strong brand. Synlait has prioritized the market of infant and adult nutritional products because their focus was to develop innovative value added milk products and was trying to improve the value of the milk they produced. They succeeded to perform well due to the global demand for safe, reliable and protein rich food. Synlait has expanded into international market by establishing strong relationship with key players across the entire value chain which includes milk suppliers, milk distributors and key customers. The international strategy and used by Synlait includes two steps, differentiated milk supply and manufacturing excellence. Synlait differentiate the product at its production stage through breeding and feeding technologies in the first step and this enables them to produce products that satisfy the individual customer requirements. In the second step Synlait’s specialist manufacturing facility allows flexibility to meet a range of individual customer specifications. The mode of entry was by establishing strong relationship with leading food companies across the globe using its international strategies.