Blue River adds new dimension to sheep industry

Blue River Dairy LP is a joint venture between a Southland farmer and a prominent Indonesian family. The Southern company is focused on the provision of milk products and the company is doing very well indeed.

Blue River Dairy LP is a joint venture between a Southland farmer and a prominent Indonesian family. The Southern company is focused on the provision of milk products and the company is doing very well indeed.

Blue River Dairy LP is a joint venture between a Southland farmer and a prominent Indonesian family. The Southern company is focused on the provision of milk products and the company is doing very well indeed.

By Peter Owens

For thousands of years people on the rim of the Mediterranean and on its islands have had dairy sheep products as part of their staple diet. The owners of a Southern company at Balclutha had milked East Friesian sheep for their base product. The supply was adequate but the cheese the owners, who were marketing to people of Mediterranean background in Australia was inconsistent in supply and quality. There were also serious management problems.

The enterprise was about to collapse when Southland farmer/entrepreneur, Keith Neylon, bought the undertaking in 2004 and transferred the entire operation to Invercargill. Neylon knew an ice cream operation had closed but that its export-approved plant was still there – inoperative but ready to go. He acquired this plant and set about re-jigging the entire sheep milk operation. This included a major worldwide research programme into sheep milking and its technology.

The whole operation then became integrated vertically. Blue River Dairy Products Limited (100 percent Neylon owned) was the manufacturing and distribution arm. This company was supplied by another Neylon-owned company with top quality dairy sheep milk as and when required. Neylon had seen that the inconsistency of supply and quality had limited the scope of the marketing of the product and he was determined that this would not happen again.

On acquiring the company, Keith Neylon bought and converted a dairy farm at Brydone into a dairy sheep milking facility. East Friesian sheep were the base breed but since then other breeds of sheep, including Poll Dorsets, have been introduced to the milking flocks. However, since 2004 when the Brydone farm was converted, the production base has expanded and there are also farms and state-of-the-art milking facilities at Winton and recently at Hedgehope.

Because of a close business association with Asian markets, Keith Neylon saw there was a vast potential market in Asia and set about marketing his sheep milk products into China. This is a very difficult and indeed unforgiving market for those who fail. However it is rewarding for those who succeed.

Mr Neylon and his team succeeded and have built up a strong Chinese market for sheep milk products. However, Neylon then found the business had to expand and this meant more capital. He disposed of his substantial deer industry and thoroughbred racing interests, including a racehorse training establishment at Burnham near Christchurch.

Mr Neylon saw that just to the North of New Zealand is the rapidly expanding Indonesian market of over 243 million people. Like China it has a ballooning middle class that is clamouring for quality protein-based products and has the money to pay for them. He was realistic enough to know that once again it was case of supplying top quality product, as and when required, with consistency of quality and supply.

Once again, with capital required for expansion, Keith Neylon sold shares in the Blue River Group of Companies to Indonesian investors who have strong links with New Zealand.

The capital released by this sale was used for research and development into new milking sheep technologies and in the construction of a new space-age milking facility at Hedgehope not far from Winton in Southland.

This sale was applauded by Prime Minister John Key who said, “There’s a massive market out there. It’s one thing to recognise the market – it’s another to have the tentacles to reach into it.”

The result is that today Blue River has something no other sheep unit in New Zealand has: a revolutionary new milking technology; a genetically selected milking flock of 14,000 sheep; an export approved processing plant and over 50 employees.

At present the company is producing five varieties of sheep cheese. Two of these are of the feta variety, which is the best-known dairy cheese. A white, salty and crumbly cheese this has been made around the Mediterranean for thousands of years. It is referred to by Homer in the Odyssey. These two varieties are branded as Tussock Creek and Vintage Feta. The company also produces Monowai Haloumi and Blackmount Cheddar, as well as Curio Bay Pecorino.

All products are gluten free and there is also a significant market for powdered sheep milk in both the export and domestic markets.

Blue River LP, thanks to the foresight and entrepreneurial skills of Keith Neylon, which have been recognised by the investors, a new dimension to the sheep industry of New Zealand and a new food product for the burgeoning Asian market.

So successful has the Blue River LP operation been, it has attracted the interest of Landcorp, New Zealand’s biggest commercial farmer. While Landcorp has acquired a special flock of East Friesian ewes to convert to milking, it still awaits board approval for an expensive new dairy shed.

Landcorp says the production and sale of sheep milk products would fit well with its current meat and wool operations and the company has undertaken considerable research into the sheep milk industry. Indeed, it initially considered a joint production and processing venture with Blue River but then suddenly decided to “go it alone”.

So intense is the growing interest in sheep milk that a Ewe Milk Products and Sheep Dairy Conference is to be held in late February 2015 at Massey University.

Recently it became obvious that more capital was needed to maintain the processing plant at an economic level and the certification from end user countries. Having spent the proceeds of a previous share sale as introduced capital to sustain the business, Keith Neylon felt the time had come to rationalise the company.

Accordingly Nutrition HK from China has bought the processing area of Blue River Dairy, including the plant, business and the Blue River brand for an undisclosed price. That company will spend $40 million on development, including desperately needed new drier. Meanwhile, Blue River will concentrate on farming the dairy sheep and producing milk for processing by Nutrition HK.