On this special Let’s Chat Markets episode, Eric Meyer welcomes Jeff Goodwin, a featured speaker at HighGround Dairy’s second annual Global Dairy Outlook Conference next month in Chicago! The podcast can be found here, or wherever you listen to your podcasts. Subscribe so that you never miss an episode!
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[00:09] Eric: Welcome, everyone, and thank you so much for listening today to our second of a handful of Special Edition Let’s Chat Markets podcasts, the Outlook Conference series! Eric Meyer here, President of HighGround Dairy and we have just about one month to go before we all assemble in Chicago on June 20th through the 22nd for our second annual Global Dairy Outlook Conference at the Historic Union League Club.
Keeping with last year’s tradition, having a chat with a few of our speakers and panelists before our conference to get everyone warmed up for all the industry and market talk next month here in Chicago, joining me today is Jeffrey Goodwin, Chief Executive Officer of Pivotal Ingredients. Jeff got his start in agriculture in Australia over twenty years ago and has worked with numerous big-name companies before starting his own firm just over two and a half years ago, during the height of the pandemic, mind you! Jeff, we are very glad you’re joining us this morning, can you tell our audience where you live and what time it is there?
[01:11] Jeff: Thanks, Eric. It’s great to be back. I really enjoyed the conference last year so definitely looking forward to getting back to Chicago. It is currently 4AM here in Brisbane on the East Coast of Australia. I get to talk to people around the world but the downside of that is sleep sometimes suffers. We are here in Brisbane and we have a team in Indianapolis so I’m back and forth between the midwest and the East Coast of Australia.
[01:39] Eric: My goodness, Jeff, insanely early, especially because you asked me to adjust our time just ninety minutes ago which meant it was 2:30 in the morning when you started checking your phone. That said, those that have worked with me over the years know that I am an early riser as well and you’ll find me in the office normally between 5 and 6 AM most days.
Jeff, we had to re-arrange this interview a couple of times, mostly due to children—whether that be ailments or activities. Tell us about your family and are you, like me, mostly just operating as a chauffeur these days to the children to their endless list of activities?
[02:16] Jeff: That’s a very accurate description. I have three boys, one in the final year of High School, one in year eight and year four. They can’t say no to activities! They just love all things going on at their school and so it just means constant shuffling back and forth across Brisbane but you wouldn’t want it any other way, right Eric?
[02:37] Eric: I agree, it’s fun. These, specifically in the US, for my kid’s activities with baseball and softball, May and June are just insane. My wife had put together a calendar of events for the month of May and between our three kids, there were sixty different sporting events or practices that we had to bring them to. So, it’s just trying to figure out the logistics of who takes who wherever and trying to figure out those carpools. It’s a challenge, for sure, because we have day jobs too, right Jeff?
Jeff: Exactly. When you do three drop-offs in the morning for various things, you’re like, “something is off here,” but it has to be done!
[03:17] Eric: Yes, absolutely. So Jeff, we are incredibly excited to have you back as a returning champion of sorts. For those that attended our inaugural conference last year, your talk on China’s dairy market, unlocking some of the unknowns of the local industry along with identifying trends as to how domestic and imported milk are consumed in the country, were quite insightful.
Based on attendee feedback, we were happy to invite you back and even more thrilled that you will join us as a returning speaker/panelist from our inaugural conference. So thank you! I think the real value add you bring to our attendees is your diverse experience across multiple markets in Asia, which we will get to later. But let’s remind our listeners, upcoming attendees and those still trying to get approvals to head to Chicago in June for our conference. Tell us a little about yourself and your storied background in dairy as you have worked with some fantastic organizations over the years.
[04:15] Jeff: Thanks, Eric. I have set myself a bar here to be able to be allowed to come back. I’ve also had an independent review of my topics and predictions from last time because I find at a lot of these conferences, people make predictions but they are never really necessarily held accountable for whether those were accurate. So, I have given off the presentation to an independent economist to look at and it looks like what I was saying will happen, happened. So, I think I’ve earned the right to come back and do it again. So, just to let you know that I did that in the background!
Eric: Love it.
[04:53] Jeff: My background was originally based in Brisbane in the Australian dairy industry, which was unfortunately, a shrinking industry as the milk pull sort of shrunk and I think Australia is an example of where shrinking milk pulls show where a country ends up. Queensland is where I was based and we were representing Queensland producers which don’t exist anymore. Then the industry shrunk into Victoria and so we got to work with some of the Australian dairy industry and some of them are still around, a few gone. One of them that has gone—because I did my undergraduate in China—I remember the export manager there explaining to me, “Well, it’s great that you speak Chinese but you probably should have learned Japanese because the Chinese will never be able to import dairy products.” Which turned out to not be a very accurate forecast but that was the view in Australia at the time was the Japanese export market, China was interesting but they didn’t really see the potential for it in the early 2000s and by 2005-2006 that had completely changed. It did continue to shrink, though, and to take my career forward, I had gotten an opportunity to move to Singapore with a young family and my second son, Connor, was born in Singapore. The environment then was very much about the growing demand in Asia and Australia, obviously, not being able to grow and sustain that New Zealand was stepping up and the US coming into the market foR the first time. So, a lot of the time then was spent introducing US brands, US suppliers to Asia-Pacific and setting up offices in Vietnam for the growth that was happening there, and we got to work on some interesting projects in Malaysia to set up some factories and further processing in Malaysia.
Then, I got an opportunity to move up to Shanghai with Glanbia and that was a fantastic experience, taking the—at that stage—US and Irish product. That was when there was still one group across the region. Then, moved to Seattle so I got to spend some time in the US. And then from the US to New Zealand to the sort of dairy-export-central. Along the way, we had our third son in Shanghai. Unfortunately, we didn’t have any kids in the US but we have started a company now that was started in the US and is very much part of the family. You know very well, Eric, when you start a company, it’s like a member of the family. The company that we started, Pivotal Ingredients, has grown into a medium-sized company which was what we wanted. I have always been close to the Pacific Ocean but have moved all around the Asia-Pacific.
[07:29] Eric: So you’ve lived in a lot of different places over the years—what has been your favorite place to be an ex-pat, and conversely, what was the worst place and why? Tell us a little bit about those experiences—the good and the bad!
[07:42 ] Jeff: I think going from being a student to an ex-pat in China was fascinating. The experience and getting to be part of that massive growth phase in the 2000s in China was an unbelievable time. Every project that you worked on was growing, every product that you tried, there was a market. There was just no shortage of opportunities. It was an amazing time. My wife is originally from China so that was good to be close to her parents as well so our time in Shanghai was very special.
Singapore is a sort of place that when you first move there, you can’t imagine why anyone would want to live anywhere else. But, if you are an outdoors person like myself, you can only run around MacRitchie Reservoir so many times before you start to long for a bigger place. I think Singapore is a fantastic location but to live long-term for an outdoors person, it’s probably a little bit constrictive in terms of the fact that it’s a city and a country. I think it’s still a great place to be based but I can’t imagine myself living in Singapore again.
[08:48] Eric: Yeah, it was hot and sticky for the handful of times I was there. It seems like that would get old if you had to do that day in and day out for a few years.
[08:58] Jeff: Well, yeah, we got to talk about the weather every time we got to catch up. In Singapore, it’s 27 degrees in the morning or 29 and it’s 32 or 34 in Celcius. So, you don’t get to chat much about the weather.
[09:11] Eric: Yeah, it’s the same and it rains on you almost every day. Well, real quick about China—I’m really intrigued. What do the local population think about ex-pats and how did that work? Or was Shanghai kind of a city where that didn’t really matter because there were so many? I’m curious about how you are viewed as somewhat of an outsider living there and working there. Was it something that was appreciated or did you feel like it was a challenge?
[09:39] Jeff: Well, Shanghai was definitely built for ex-pats with its history. It was very much an easy place to be an ex-pat. The food is geared towards that and the entertainment was geared towards that and there is some very good international schools—some very expensive international schools but they are there. So, I think as an ex-pat experience it’s very simple. Also, because of that, it’s unbearably expensive in some ways. I think Shanghai as an ex-pat is one of the most expensive places in the world to be based with that cost of education and the housing costs involved. When I went out for work, I was often traveling up to regional places where dairy factories or infant formula factories were going in. Places like Gansu Province, Shandong Province, which are just unbearable beautiful places and paths. You get to see some amazing things along the way as an ex-pat doing international ingredients, you get to see some stunning places. Up there, you would get sometimes a knock on the door at 3 am from the local police saying “Why are you here? foreigners don’t come here very often.” So that was always interesting. I think in certain rural places where they didn’t see a lot of ex-pats and it was because the diary industry was strong there but there weren’t many other international industries there. It would be a bit odd sometimes but in terms of Shanghai, it’s very user-friendly.
[11:05] Eric: Sure, that’s great. Talk to us a bit about Pivotal Ingredients, what the business is all about and how and/or why you made the choice to leave the corporate world and start your own thing?
[11:19] Jeff: At Pivotal, as you can see if the name, we are trying to shift people’s thinking about how dairy can be approached. It probably starts from the stories earlier where I was focused on China when everyone else was on Japan and focused on whey when everything was about cheese—I’ve always been fascinated by what is seen as undervalued streams or what are undervalued streams. So Pivotal was started around the idea that there are some dairy ingredients that are currently not fully brought to value. If you think about that cheese is the byproduct of whey, I think that whey protein isolate is the byproduct of procream. I think there’s a lot of value in those high-phospholipid whey proteins and I think a lot of people agree but no one has really had time. When you’re in the corporate world, you know that these streams are of value but the machine is running so fast, you can’t stop and bring them to value. I started Pivotal to really focus in on a couple of these products: some of the dairy bio-actives that come from the lactoferrin process, some of the whey proteins that have these high-phospholipid contents or higher fat contents that I think are very interesting. Also, to be able to take, across sectors‚ you work across all of these cultures but there are these massive differences in cultures between sectors: the yogurt sector versus the ice cream sector, sports nutrition, infant nutrition—sometimes these gaps are bigger than they are across countries. Talking to infant nutrition guys in Singapore, you speak the same language, sometimes more than one of your own countrymen because you are so deep into that world. I think there needed to be a company in Pivotal that can go across those cultures as well, and go across sector cultures and obviously with all of the places that I’ve lived and my passion is for international things across regional cultures. That ability to move across regional cultures to bring products to value and to do it across sectors seemed to be something that was needed in the market and I hope that we have been able to start to add value by doing that. I also understand the challenges of doing that even though other people obviously see this. It’s very difficult to do it when you are on the treadmill of a corporate role.
[13:41] Eric: Sure, that makes sense. I feel like the business that we started, which shockingly was over 10 years ago now—the ability to be nimble I think has been a real benefit for us versus some of our competition or being able to get involved quicker. It’s been easier. I’m so impressed with what you’ve been able to do in your career and grow as well.
This year, we have you back and talking about China again but less on the demand side, although I’m sure you’ll get plenty of questions about “when’s China’s demand coming back?”, but we are going to have you focus a little bit more about the supply side because that has been important here since the pandemic. Tell us a little bit more or give us a little bit of a teaser as to what you’ll be focusing on as it pertains to China at this year’s conference.
[14:31] Jeff: Obviously, last year we focused on: if you don’t have former colleagues, you can’t pick up the phone and see what is happening in China— what are some of the available, transparent indicators that you can look at as a lead-indicator as to what is coming. That, I think, was helpful because people said “I can access all of that information any day and I can get a sense of what is coming.”
The other thing that China does is it works in these five-year crunches of policy. The fourteenth five-year policy has been announced and these are very insightful in terms of what is coming because whatever Beijing says will come and will eventually happen, it’s just a matter of timing. Often, they set very ambitious numbers and that doesn’t happen in time and people can sometimes dismiss it but China has told us clearly everything it is going to do in the dairy space and it’s executed all of those things but sometimes with a lag. They said they were going to reduce the amount of infant formula brands, they were going to grow domestic production, they were going to grow some domestic champions—which is Yilli and Mengniu—and they have definitely filled that.
I’ll be diving into a little bit about the current five-year plan and what it says China is going to do. we will be taking some surveys of key people in China to be able to get feedback on: what about people who live in this in China every day, do they believe this is going to happen and if they do, when, and then: what should we be positioning ourselves as an industry to be able to participate in that so that we’ve got the wind behind us rather than in front of us in terms of what we are producing and what we are focusing on and what we can potentially do together as an industry to take advantage of that. So that’s going to be part of the focus, is around what is coming and why are they driving this way and what does it mean for us.
[16:34] Eric: Sure. In addition, when we first had our brainstorming session on the more important topics to cover within Asia and not just focusing on China, we also thought, looking at Southeast Asia as well as the impact of higher interest rates or borrowing costs on market participants within the region. What kind of flavor can you provide as to how things are changing within those markets because of this and other factors?
[17:01] Jeff: Once again, there are some mixed signals here so breaking those apart: why are there mixed signals and what should we be looking at? In Southeast Asia, it’s such a trifurcated market—you have the domestic premium market, the domestic standard market and then you have this export production. That export production is not insignificant. The amount of skim milk powder that goes into Malaysia, that goes into sweetened condensed milk that then goes to sub-Saharan Africa, to Myanmar, to other countries—is a huge business—hundreds of thousands of tons. Those interest rate hikes that you mentioned have had a huge impact in those customers’ ability to run their businesses, for those brand owners to run their businesses. When we see the Southeast Asia numbers go down, we looked at the data in terms of retail in Malaysia, it doesn’t reconcile. That’s because of this significant export market so I think as an industry, we have to look to where the product goes and look then beyond that where that product goes to understand those markets. So, I hope to give people some insight into what to look for for that, how to track that so that you can see what the Southeast Asia demand is X but the re-export demand is Y and that is why we are seeing what we are seeing. The re-exporing markets—Thailand, Malaysia—and the import markets—Indonesia, Myanmar—for these products and also China to a degree. A lot of the China skim does go into making creamers that end up in Russia and once again, non-dairy creamers in Southeast Asia that end up around the world. We have some numbers and insights and end products we can show people that give a flavor for that and give the audience a way to interact with those numbers and have visibility into “my product goes to here, that product goes to there and what’s happening with those markets.”
[19:02] Eric: That’s great, I’m looking forward to it! Last question: So many places you’ve lived in and visited, but then there’s Chicago, where you’re coming back to next month. It’s where I live but I know you’ve been numerous times. For those listeners coming into Chicago—whether for the conference or just in general—Jeff, what is something to you that is can’t-miss when you’re here, whether it be an attraction or food or something else?
[19:31] Jeff: I think Chicago in the summer has to be one of the greatest cities in the world. I don’t think it could be beaten. You definitely have a fan of Chicago here. When you go for work, you often don’t get to do a lot of tourist things along the way but Chicago is sort of user-friendly for that. The architecture river tour is genuinely well-put together. It’s a very good tour. Sometimes these touristy things don’t live up to the expectations but I think the architecture river tour is a must-do. As a dairy guy, you have got to try the deep-dish pizza and get into that debate. I think getting abused at Ed Debevic’s is fun. That’s something I usually recommend and I think it’s a little bit dated and old-school in some ways but it’s still hilarious so I think that’s worth the walk down the road for a burger and a small dose of abuse. The blues scene there, obviously—you have the tourist sections and then the other sections—I think you need to get into some sort of evening activity at a blues venue. Some of the best Cuban food I’ve had, strangely, has been in Chicago. So, find a blues venue, go beforehand for a nice Cuban meal, and head into some blues bars. I think you can’t go far wrong in Chicago but that would be my list. (view our complete Chicago Summer Guide here!)
[21:01] Eric: Yeah, I did not expect such a robust answer so I appreciate that. Well, Jeff, I am so grateful for your time today and incredibly excited to have you back as one of our esteemed speakers and panelists at this year’s HighGround Dairy Global Outlook Conference, taking place here in Chicago June 20th through the 22nd.
Listener, if you have not yet registered, or have not told all of your industry colleagues about this event, I would highly recommend that you and your friends visit our website and take care of that today. More podcasts like this showcasing additional speakers are set to air in the next couple of weeks, so stay tuned!