E-Piim plunges into production of valuable baby food ingredient

Photo: Andres Haabu / Postimees

E-Piim, a leading cheese maker in Estonia, became the first in Baltics to produce high quality demineralised whey powder (Demin 90) used in infant formulas – a substitute for breast milk.

In food products industry, nothing is as sensitive, probably, as baby food. The organism of newborns is weak, and the slightest contradiction in the food may lead to serious consequences. Thus, every ingredient thereof must be made of the best raw materials and produced according to highest standards of quality.

For production of demineralised whey powder, E-Piim rebuilt its entire dairy, purchasing equipment unique in Baltics. The construction took two years, investments reaching €5.5m, one million of which was EU aid. The product being in high esteem in the world, the big investments will be earned back in three years – should all go according to plan.

According to E-Piim CEO Jaanus Murakas, profitability of cheese making lies not in effectiveness of production and excellence of marketing – another secret is enhancing the value of the side product: whey. «One may do one thing well, but should the other limp – the whole will be lacking,» said Mr Murakas. Earlier, E-Piim used to export whey syrup from Põltsamaa straight to Germany and Poland, where it was used to make various products.

According to Mr Murakas, Demin 90 or whey powder with 90 per cent of salts removed is twice as expensive as ordinary whey powder. «Naturally, this comes with large expenses as well. Not just the investment; the production process also costs more; even so, it is still highly profitable business-wise,» he explained.

Estonia has a competitive edge for the production of Demin 90, with its extremely high quality requirements, being blessed with crude milk of stable quality – in the production of such type of powder, the entire production chain from crude milk to final product is thoroughly inspected.  On top of that, the production of the cheese must be totally natural – no colorants or preservatives whatsoever.

At the same time, the investment is very risky, Demin 90 being a real niche product with very few buyers globally; at that, the baby food market is extremely hard to access.

The key to the entire demineralised whey powder business is the giant Chinese market, the doors to which are closed for Estonia for the time being – on a state level, Estonia needs approval for exporting its products into China. According to Ago Pärtel, director general of Veterinary and Food Board, they are midway with obtaining the certificate i.e. all documents required have been submitted, this spring; now, we are waiting for the official reply. In China, known for its bureaucracy, this may take up to a year.

At the moment, E-Piim sells the powder into Australia, European Union, Malaysia, and Singapore. Pursuant to business plan, however, Chinese market should take a whopping half of the production.

«For us to be able to sell the entire production as Demin 90, opening of the Chinese market is critical for us,» said Mr Murakas, admitting that they are getting  a bit impatient.

But why China? Well, because in China, 17 million babies a born in a year – mothers, however, may only stay home with them for a month and a half. Meaning: in China, babies are hardly breast-fed at all. Meanwhile, the Chinese painfully remember the world shaking scandal of 2008 when melamine was found in baby food based on Chinese raw materials. Six children died, thousands fell ill. To this very day, the Chinese are highly sceptical towards raw materials produced in their homeland; at least to children, no one feeds products made in China. Thus, the giant of a country imports about 100,000 tonnes whey-based powder a year.

It is an ambition of E-Piim’s to produce a whopping 5,000–6,000 tonnes of Demin 90 a year. A half of that is supposed to go to China, the rest split between three-four others markets – Australia, EU and Singapore, Malaysia or Indonesia, for instance.

In case of the gloomiest scenario, however – Chinese door remaining shut – E-Piim will probably be producing whey powder with higher salt content. A cheaper version, but still making for decent added value.

For even the ordinary whey powder is esteemed, on global market; already, this is exported by E-Piim to Israel, EU and Arab states.

According to Mr Murakas, Demin 90 production is a good example of smart specialisation, allowing opportunities to compete with large international groups. «The big groups keep getting bigger, thus losing flexibility. In between there, an increasing amount of niches appear, things they will not cannot be bothered with – for these, we will need to look for, make use of these,» explained Mr Murakas.

When it comes to the construction works at Järva-Jaani dairy, Mr Murakas hopes to have it completed by Christmas. At the moment, they are still installing the second demineralisation device and building a substation. By the way: though the plant’s production volume will double, no new staff needed to be hired. This, in turn, vitally enhances effectiveness of the enterprise.

Mr Murakas did not exclude that, someday, they would be making baby food of their very own. This, however, is a thing for the distant future.

Demin 90

•    Demin 90 is a demineralised whey powder use as an ingredient in infant milk formula. 90 indicates the percentage to which salt has been removed. In the formulas, whey powder is used for the reason of whey proteins being closer to breast milk proteins than milk proteins, thus more fitting for babies. However, whey needs to have salts extracted, prior to mixing it into infant formulas. The process is called demineralisation.

•    Whey or cheese water is a by-product while making cheese or curds. With every kilogram of cheese produced, 8-10 litres of whey appear. E-Piim makes cheese at its Põltsamaa dairy.

•    The whey remaining after production is filtered, separated, concentrated via a membrane device, and pasteurised. Thereafter, the whey concentrate is taken to Järva-Jaani, where electrodialysis (demineralisation) is carried out, extracting the salts. Thereafter, the mass is pasteurized again, eater is steamed out; the product is crystallised, dried in a powder tower and packaged.

Comment

Helir-Valdor Seeder, minister of agriculture

A major problem in out milk production is 20-some per cent of crude milk being exported to Lithuania, where value is added to it. We would need to process the crude milk ourselves, providing added value, so the jobs and the money would remain here. The more so now as we see Lithuania having a difficult time due to the milk blockade; and we do not know what will be Russia’s decision regarding Estonia. We must try to process as much as possible, finding ways to export the outcome.

Production of demineralised powders is an opportunity to expand both to West and East. These powders are very valuable on Chinese market, and we are striving hard to enter the Chinese market. Should that channel open up, there would be reason enough for other investments like that.

Also, powder production allows for some added stability. While we produce products with very short «use before» dates, these will have to be sold very fast; with powders, the shelf life is considerably longer. That will provide a way to maintain production even with temporary setbacks on the market.

I’m hopeful and sure that one day the permit to sell into China will come anyway; but when, I cannot say as yet. It is taking longer than we hoped for, initially. And we cannot make good sense of the bureaucracy – how much of it is just technical administration, how much is diplomacy and how much is politics.  

But, meanwhile, other marketing channels need to be sought. It is also possible to market via such producers as have the certificate. Meaning we are not cut off from the Chinese market, we just lack direct access.

But demineralised powder is an example of a product with high added value. Modern milk productions use new technologies and protein is separated from milk – this is a product of high value, providing for new options in product development and producing milk-products.

Estonia has no such technology, as yet. What out milk industry is producing currently is definitely of high quality, the crude milk is of good quality; even so, state of the art and technology are advancing, we will have to keep up.