Dairy Crest Invests in GOS in Order to Expand Ingredient Applications

21 Dec 2015 --- UK dairy Dairy Crest, which will divest its dairy interest to the UK arm of German dairy Muller on 26th December, has announced that it has purchased the outstanding 50% share of Promovita Ingredients Limited held by Fayrefield Foods Limited for a cash consideration of £6m, funded from existing borrowing facilities. The company described the move as the “logical next step”.

Promovita was established in 2014 as a 50/50 joint venture between Dairy Crest and Fayrefield to develop and produce Galacto-Oligosaccharide (GOS), a prebiotic for use in infant formula. However, with the development of the prebiotic taking off, Dairy Crest told FoodIngredientsFirst that bringing GOS to other application areas such as animal nutrition will be a focus for the company in the future.

Having invested in the manufacturing capability at Davidstow and successfully produced GOS samples, Dairy Crest believes that full ownership of Promovita is in its and shareholders’ best interests. It allows Dairy Crest sole control over the development of the GOS business and to fully benefit from the value that this business generates.

Mark Allen, Chief Executive of Dairy Crest, commented: “This is a further important step in the evolution of our added-value ingredients business. We remain on track to begin commercial production of GOS in early 2016 and this acquisition gives us full control over the development of this exciting business.”

In 2014 Dairy Crest, one of the UK’s largest dairies, made the difficult decision to divest its dairy business to focus on other, more profitable areas. It has spent the last 8 years focussing on added value ingredients and the company feels that developing GOS is the next step in ensuring growth for a leaner, more profitable company. The potential of GOS in areas other than infant nutrition has yet to be realised, says the company.

Dairy Crest's share price responded well within hours of the announcement.

By Kelly Worgan