On August 10, the Synlait Milk managing director officially stepped down after turning a bare paddock near Dunsandel in Central Canterbury into a multi-product company now worth $2 billion.
With a second $260 million nutritional powder manufacturing site at Pokeno, in north Waikato, set to start processing next year for the 2019-20 season, the company had much more growth to come, he said.
“We are investing $500m over the next two years. So Synlait’s growth is accelerating, not slowing down.”
Shareholders agree, with Synlait Milk’s share price lifting from $4.50 to $11 in the last year.
“What the company can achieve in the next 10 years is far greater than the last 10, as we have a much stronger base to work from.”
Penno is unperturbed by New Zealand reaching peak cow and being unlikely to greatly increase its total milk production, indicating increasing competition between dairy companies for available milk.
Coming from a mixed cropping and sheep farm near Waimate in South Canterbury, Penno said he always wanted to work the land. “I went to Lincoln University, thinking I would return to the family farm.”
He then got involved in the dairy industry, initially as a consulting officer and then a research scientist at Ruakura, Hamilton.
“I realised what a great industry it was in terms of the ability for young people to gain farm ownership and build their business. Also the array of products that can be made from milk.”
“I was probably always a businessman that for a while happened to be a scientist, rather than the other way around,” he reflects.
“As soon as I was a graduate I was running little businesses on the side.
“Science is interesting, but it’s no way to make a living. I knew very early that if I was going to get into farming I had to find a way of creating capital.”
Meeting two other like-minded high-achievers Ben Dingle and Juliet Maclean, the trio “took a big risk” to buy a large farm in Central Canterbury, converting it to dairy in 2000.
That farm, Robindale, near Hororata, remains the export processor’s largest milk supply farm.
“That was the start of Synlait. We were learning to work with other shareholders and started to develop a bigger vision.”
For five years, the trio bought and developed dairy farms.
“We realised that the same thing that made Canterbury a great place for dairy farming made it a great place to have a manufacturing and export base.”
So the trio, still in their late 30s, raised capital to make the leap into manufacturing.
“We originally thought it would be a small manufacturing company that took our own milk. But we soon realised that you need economies of scale,” Penno said.
Synlait Milk was founded in 2006; its Dunsandel manufacturing site processing its first milk in August 2008.
Since then it has been almost a constant construction site, with new driers, the production of a high-value milk protein called lactoferrin, nutritional infant formula facilities, and most recently a liquid dairy packaging plant coming on-stream.
In its first year of manufacture the company had 44 staff; it now has 600 and 200 farmer-suppliers.
Synlait’s main focus was Chinese infant formula, a high-value, fast-growing market which has increased from 3000 tonnes to one million tonnes in 10 years.
It was a New Zealand company, despite Chinese company Bright Dairy owning a 39 per cent share, he said.
Penno holds a 3.4 per cent shareholding in Synlait Milk and will continue as a director.
He will be replaced as chief executive by Leon Clement, Fonterra’s managing director of Fonterra Brands New Zealand and, prior to that, its managing director of Sri Lanka and India.
Penno, Dingle and Maclean have all sold out of Synlait Farms, which is now the Chinese-owned Purata Farming
“I never meant to be a chief executive. I meant to build a business and ended up in the role and it has taken a while to extract myself,” Penno said.
“Synlait has been a major part of my life for the last 17 years, and I’m very proud of what we’ve achieved in a relatively short time,” Penno said. He was not looking for another job. “I’ll step back and take a bit of a breather.
“I will be spending more time with my family. Without their support I wouldn’t have been able to dedicate so much time and energy to a fast-growing business.
“My wife Maury (Leyland, a former Fonterra senior executive), and I have identified a few opportunities with start-ups and young companies we’re passionate about, which is where I’ll be channelling my expertise.”
The couple will remain in Canterbury, where they have a hill country block on Banks Peninsula.
“There is nothing special about Synlait,” Penno maintains. “It just shows that if you identify a high-value market opportunity and build the business back to a production base in New Zealand that meets consumer needs, there is tremendous opportunity to create value.
“It’s not something we have traditionally done well in New Zealand. We tend to start with farming, grow something, manufacture it into products then go out to the market.”
By: Heather Chalmers