Point of Order: Stopping the grain drain: govt pumps $6m into plans to make more oat milk in NZ

Who has done what in the pioneering of the oat milk industry in this country – and whether state funding is needed by industry players – are questions raised by a perusal of newspaper and magazine headlines on the development of the milk.

Point of Order found this report in October last year –

Boring approach: NZ’s first commercially mass-produced ‘local oat milk firm targets APAC expansion

New Zealand’s first locally mass-produced oat milk brand Boring Oat Milk has its eye on the discerning APAC-wide coffee crowd after a successful domestic supermarket launch, and is confident that its ‘whisper, not shout’ strategy will stand out on shelves.

Great. But then we found this headline on a report published several months earlier:

New Zealand’s First Oat Milk Factory to Open in Southland

A new plant-based milk processing facility is to open in the province of Southland, New Zealand. The facility is being built by New Zealand Functional Foods in collaboration with Great South.

But even earlier was a report published in January 2020 under the headline:

Oat milk company plans purpose-built factory to meet surging demand

Nine months after Otis Oat Milk launched, the company has announced plans for a purpose-built factory capable of producing 25 million litres a year.

New Zealand’s first locally produced oat milk, Otis is made with Southland and Otago oats, processed at Food South’s Canterbury factory.

One thing became clear: there was a strong case for processing plant somewhere in New Zealand, because substantial volumes of our oats were being shipped to Sweden to be processed there, then shipped back here as oat milk.

Point of Order’s appetite for information about the oat milk industry was whetted by the Government’s announcement yesterday that $6 million of public funding is to be invested in processing.

The press statement said Southland-based oat milk producer New Zealand Functional Foods will be given this funding from the Regional Strategic Partnership Fund.

Economic and Regional Development Minister Stuart Nash said the government’s investment will help provide the capital needed by New Zealand Functional Foods to build a specialised, large-scale processing plant at Makarewa, with capacity for producing up to 80 million litres of plant-based milk a year.

“We set up the Regional Strategic Partnership Fund (RSPF) to help build more productive, resilient, and sustainable regional economies. The investment in New Zealand Functional Foods, to develop a plant-based beverage manufacturing facility, brilliantly aligns with this vision,” Stuart Nash said.

Plant-based milk alternatives are a fast-growing segment of domestic and international consumer markets, he explained.

The amount spent by Kiwis on plant-based milks almost tripled from $52 million in 2017 to $144 million in 2019.

“We know that oats grow well in Southland, and being low in water use, land use and emissions, they are an excellent raw ingredient for an environmentally sustainable alternative-milk option. Producing oat milk locally is a lucrative way to diversify our strength as a quality food producer.

“As it stands, we just don’t have the appropriate processing facilities to domestically produce the volumes of oat milk required to make a splash in this burgeoning market.”

And:

“The investment is part of our wider Government strategy to develop a low-emissions, highly skilled economy that responds to global demands. I am confident that this new facility will add to the reputation of Southland and New Zealand as a real player in the sustainable food and beverage sector,” Stuart Nash said.

New Zealand Functional Foods is owned by Great South, the regional development agency for Southland, and K1W1, the investment vehicle of Sir Stephen Tindall.

It is building a $50 million carbon-neutral oat milk factory at Makarewa.

According to an RNZ report in February last year, key players in the oat industry wanted to capitalise on increasing demand, with the country’s first plant-based milk factory on the horizon.

The Oat Industry Group, comprised of growers, processors and retailers, had met near Gore to talk about opportunities for the future of the grain.

Southland’s economic development agency thought there was potential for plant-based beverages in the region and formed a company, New Zealand Functional Foods, to commercialise production.

Functional Foods chair Roger Carruthers said once it had secured enough investment, construction on a high-tech plant in Invercargill would get underway.

But there are other players in the game.

Boring Oat Milk made its market debut in September 2021 and quickly secured placement on major New Zealand supermarket shelves.

The product is created using oats grown in the South Island and processed at The Apple Press, a Hawke’s Bay apple juice company.

A report on The Spinoff in August 2021 introduced us to oat aficionado Morgan Maw, who established the company.

A few weeks later, Maw told FoodNavigator-Asia Boring Oat Milk was the first and only oat milk brand to be made at scale locally using local oats.

“There may be some small kitchens that make their own oat milk at pilot scale, but these are not in supermarkets, and most of the oat milks sold by larger supposedly ‘New Zealand’ brands are made in Sweden and brought in here, as many have tried and failed to implement the production of oat milk locally.

“Setting up local production took us about three years to accomplish – even going through the food compliance process with Food Standards Australia New Zealand (FSANZ) took about two years. But it was definitely worth the effort because there is such huge potential here – in 2020 alone, the oat milk market in Australia and New Zealand grew by 270%.”

Otis Oak Milk’s product was developed over two years using oats sourced directly from Southland and Otago farms and processed at Food South’s Canterbury facility.

In a press statement in January 2020, a press statement said:

New Zealand’s first homegrown oat milk producer Otis Oat Milk has announced ambitious expansion plans in response to surging demand for its homegrown oat milk.

Launched nine months ago, Otis is currently sold in 150 cafes throughout New Zealand. This year it plans to treble the number of New Zealand cafes, initiate sales in Australia and, have Otis available on supermarket shelves.

The company’s plans included the launch of the country’s first processing facility for plant-based dairy alternatives in Dunedin, lifting productive capacity to 25 million litres per year and allowing expansion to overseas markets.

“We see significant growth potential in the Asian markets, especially given the prevalence of lactose intolerance in those regions.”

Stuff elaborated on Otis’ plans in a report headed Oat milk company plans purpose-built factory to meet surging demand.

This report said Otis was New Zealand’s first locally produced oat milk.

Managing director Tim Ryan said about 5000 litres were made each month but the company could sell much more.

“Demand has exceeded our expectations so we’re going to expand our productive capacity and distribution to make oat milk more accessible to Kiwis and then take it to the world.”

Expansion plans included building the country’s first processing facility for plant-based dairy alternatives in Dunedin.

This would grow productive capacity to 25 million litres a year, allowing expansion into overseas markets.

In September last year Otis announced a supply deal that would result in its milk cartons being sold in Countdown, New World, Farro and Moore Wilson, and its online store and coincided with the company’s launch of its 1% Fund.

The aim was to help diversify farming by supporting New Zealand farmers to grow oats.

“Otis wants to help Kiwi farmers lead the way in farming for the 21st century – a way of farming that’s more diverse, more plant-based and one that works in harmony with nature, not against it,” says Otis co-founder Chris Wilkie.

But Otis and All Good – another oat milk producer – were transporting much of their oats to Sweden for processing and then importing the resulting milk.

That’s where Great South entered the story. Southland’s regional economic development agency responded to the processing challenges that the Oat Industry Group and businesses like Otis and All Good were having,

And now the Government has come to the party with its $6 million investment.

But what will the Boring bunch up north make of the government’s involvement?

Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton