F&NHB takes on mega dairy farm project

Grass to glass model aims to propel F&NHB to become a leading producer of world class fresh milk at a significantly lower cost; farm-gate price of fresh milk in Malaysia is currently one of the highest in the world.

Subject to approval from relevant authorities on the proposed acquisition of 4,454ha site at Ladang Chuping, the dairy farm project is set to contribute towards Malaysia’s food security agenda while realising F&NHB’s new growth pillar and broaden healthier product portfolio.

Malaysians are amongst the highest dairy consumers in Southeast Asia but mainly powdered milk format, which offers massive potential to increase fresh milk consumption.

F&NHB aims to work together with relevant stakeholders including the ministries to offer school children quality fresh milk at below RM1 per 180ml pack.

Apart from producing quality and affordable milk, project offers northern region wider socio-economic development and prosperity.

Fraser & Neave Holdings Bhd (“F&NHB” or “the Group”) plans to invest approximately RM650 million to establish Phase 1 of its vertically integrated dairy farm, as part of its strategic goal of becoming a leading total beverage and dairy player in the ASEAN region.

When fully completed, the farm located on 4,454ha site at Ladang Chuping in Perlis, will contribute towards the nation’s food security, providing 200 million litres of fresh milk and up to 5,000 livestock annually. Currently, Malaysia’s total dairy production is under 40 million litres with self-sufficiency at only 3 per cent in 2015, as reported by the Department of Veterinary Services.

Speaking at a media briefing on F&NHB’s financial results for the financial year ended September 30, 2019, F&NHB Chief Executive Officer, Lim Yew Hoe said that the latest investment headlines F&NHB’s strategic approach to enhance the Group’s capacity, building the sustainability of its liquid milk supply chain and support Malaysia’s health and food security agenda.

“Over the years, F&NHB has been a strong supporter of the nation’s health agenda. We recently completed a reformulation exercise of our ready-to-drink (RTD) products which resulted in 90 per cent of our RTD products sold in Malaysia today being in the healthier options category, with less than 5g sugar per 100ml.

“The integrated dairy farm will propel the Group’s ambition of becoming a major player in the health and wellness segment to the next level, with fresh milk as its new pillar of growth.

“Our main objective is to help increase the nation’s self-sufficiency level and offer quality and affordable fresh milk. The reduction in cost of raw fresh milk in Malaysia, which is currently among the highest in the world, will boost consumption of fresh milk by offering a broad portfolio of affordable and healthier dairy products,” he added.

According to Lim, currently, the average Malaysian consumes 49 litres of milk a year valued at some RM5 billion, of which 78 per cent is in the powdered milk format. Fresh milk consumption is only a fraction of total dairy consumption. While Malaysian dairy consumption is twice that of Vietnam, the Vietnamese consumption is 75 per cent liquid dairy and 25 per cent powdered. Hence, there is more than 50 per cent potential to grow liquid fresh milk consumption.

Over the last two decades, Vietnam has successfully transitioned from being a nett importer of powdered milk to become a major producer of fresh milk with 300,000 dairy cows.

“Through the proposed acquisition of Ladang Chuping, F&NHB will be able to explore the upstream insourcing of fresh milk to support existing downstream production and distribution of fresh milk products. This will allow the Group to achieve self-sufficiency in the supply of locally produced fresh milk, thus reducing dependence on imported milk and to provide Malaysians with a choice of nutritious and affordable fresh milk and dairy products,” said Lim.

The large contiguous land in Ladang Chuping also enables F&NHB to adopt a highly mechanised commercial farming model, utilising the latest and best-in-class global farming technology.

Lim added that with the mega farm potentially housing 20,000 dairy cows, mature cows or post-lactation cows can be passed on to feedlot producers for meat purposes and contribute towards beef sufficiency of the nation.

F&NHB plans to allocate over 3,000 ha of the land in Ladang Chuping for crop farming. Other than supplying its dairy farm with feed, excess corn grains will be sold to the local market to support the Government’s aim to reduce dependency on imported feed.

Additionally, the farm will utilise sustainable green technology such as solar panel roofing to generate renewable energy for daily use; biodigester system to convert waste into bio-gas production to generate energy; and repurpose solid effluent as natural soil nutrients, and others.

F&NHB is also looking forward to setting up a knowledge centre for dairy and crop farming, and seedling research centre on the farm.

F&NHB Chairman, Tengku Syed Badarudin Jamalullail said, “This is not just an F&N project as we see it as our contribution to the development of the agricultural and dairy sectors in Malaysia.

“Our proposed investment to venture into mega dairy farming is the result of two years of comprehensive research and the Group strongly believes that this project is a positive and ‘win-win’ development for all. Our latest venture will continue our commitment in embracing a sustainable approach to build a profitable business in the long run while giving back to our people and local communities.

“We hope that our proposed venture at Ladang Chuping will help increase rural economic development, raise the socio-economy of surrounding communities and contribute to the economic growth of the northern region.

“As an organisation that is constantly pushing the leading edge to develop healthy and nutritious products in order to offer healthier options for our consumers, F&N is confident that the dairy farm will help us advocate the health benefits of drinking fresh milk that can improve the overall well-being of society at large,” Tengku Syed Badarudin added.

F&NHB intends to achieve this by making fresh milk more affordable and working together with relevant stakeholders including the ministries to offer school children quality fresh milk at below RM1 per 200ml pack.

Currently, F&NHB is evaluating various investment options to develop the upstream fresh milk operations. The indicative financial commitment inclusive of land purchase is approximately RM650 million for Phase 1. F&NHB expects to have first production of fresh milk within 24 months of vacant possession. The land transaction is subject to approvals from the relevant federal and state authorities.

In Phase 1 of the project, F&NHB will import 4,000 dairy cows with a potential output of 40 million litres of fresh milk per annum. Subsequent phases will take place upon stabilisation of Phase 1.

In the longer term, Ladang Chuping will be capable of hosting 20,000 dairy cows to produce 200 million litres of fresh milk yearly, enabling the Group with the capacity to export fresh milk from being a nett importer of fresh milk.