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Fonterra R&D revamp spawns businesses

By Hugh Stringleman

Friday 26th September 2003

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Three new businesses have been born in Fonterra Co-operative Group's reorganised Palmerston North research and development centre and the race is on to launch at least seven more.

A new business incubator has hatched a viable B3 novel beverages unit, a new organics venture and an undisclosed startup.

Marketing and innovation director Bob Major wants a further seven made operational within a year.

"We have plenty of ideas around here, but we need that cut through to market," he said.

The former Dairy Board senior marketer and divisional manager has been charged with implementing a big structural change announced after the first year of the new super co-operative, the co-location of dairy marketers with the researchers.

It made sense to do that in Palmerston North, which has one of the world's largest dairy research centres with 70 staff with PhDs and more than 230 research workers.

Key marketing staff moved up from Wellington and other specialist skills were recruited, some of whom have only recently begun with Fonterra.

Former site director Allan Anderson has gone and Dr Jeremy Hill is now general manager, research and technical operations.

Incoming general managers include Craig Knox for new business, Andy Shenk, planning and integration and Tim Kannegieter, knowledge services.

The new division, which accounts for about half of Fonterra's $100 million a year R&D expenditure, contains elements of former business units: Fonterra Research Centre, NZMP ingredients marketing and FonterraTech.

It also incorporates the LactoPharma Research Consortium on the biomedical uses of milk, led by Dr Tony McKenna. The Universities of Auckland and Otago are linked in the consortium, with dollar-for-dollar funding from the government.

The change was not a simple regrouping but the introduction of a new business driving force, Mr Major said.

That was the development of new products in response to market needs and to have R&D done by request from Fonterra's clients, he said.

Research effort is aimed at discovering and validating the nutritional and functional qualities of milk, while at the same time coming up with novel products.

"[It's] essentially, what we have in milk and what we can do with it.

"This new structure breaks down the internal walls and will cut the steps and the time taken to get new products to market, or research requests fulfilled," Mr Major said.

Fonterra aims to treble the impact of its research expenditure and to foster a culture of customer-led innovation, rather than research-driven.

The marketers handle the relationships with the customers, passing back the research needs and the new product ideas.

Mr Major said there was never an issue with the quality of research done for the dairy industry in Palmerston North, rather its relevance to market needs and customer demands.

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