Dairy Crest, former owners of a significant share in Wexford Creameries, are to join forces with New Zealand’s Fonterra to exploit the vast Chinese demand for baby food powder by exporting whey from their factory in Cornwall.

The products - Galacto-oligosaccharide (GOS) and Demineralised Whey – are both used in the manufacture of infant formulas, and will be manufactured by Dairy Crest. Fonterra will be the dedicated and exclusive sales channel for the infant formula ingredients produced.

Dairy Crest is entering into a newly-formed joint venture with UK-based Fayrefield Foods to produce the GOS. These plants are expected to begin production in 2015.

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The deal will be of enormous significance to the British company, whose biggest selling brands include Cathedral City cheese and Clover butter and has a market capitalisation of just over £360 million.

The alliance with Fonterra, which is expected to involve a profit sharing agreement, will involve Dairy Crest removing minerals from the whey produced at its creamery in Davidstow, Cornwall. Whey, which until recently was a by-product of cheese making, has become an essential ingredient in baby milk formula and sports rehydration drinks. The demineralised whey will be sold to Fonterra, where it will be used it to create infant milk formula for the Chinese and other markets.

If its partnership with Fonterra is successful, it would give Dairy Crest a significant boost as it attempts to reduce the proportion of its sales derived from the low margin liquid milk business, where margins are in freefall as a result of the price war with UK supermarkets.

Dairy Crest’s Chief Executive, Mark Allen, said “Demineralised whey powder and GOS form an important part of Dairy Crest’s strategy to grow added value sales. We are excited to be working with Fonterra and Fayrefield Foods to bring these two innovative new products to market. These partnerships, with leading experts in their field, give us exposure to global growth opportunities.”