Investing in the

Internet of Things
Spotlight on technology in the dairy industry
The Internet of Things (IoT) is continuing to redefine the potential of everyday items.
In recent years, we’ve seen basic jewellery become a real time fitness tracker, cars that
can alert a tow service when something is wrong, and light bulbs that dim when no
one is around.
Infusing products with smart capabilities has given new life to previously
commoditised markets and enabled manufacturers to differentiate themselves.
Investors are taking notice and with potential applications for the IoT practically
anywhere you look the big question now is: which sectors are most likely to be
transformed by this technology?
In this paper we focus on one of the most traditional of sectors – dairy farming – to
highlight the value creation potential of the IoT.

Ven Balakrishnan Lucinda Nicholson Heather Gallo

Partner, Strategy Group Manager, Strategy Group Manager, Strategy Group
T (direct) +44 (0)20 7865 2695 T (direct) +44 (0)20 7865 2754 T (direct) +44 (0)20 7865 2514
E [email protected] E [email protected] E [email protected]
Overview of the dairy tech opportunity

In arable crops and livestock farms alike, farming 2.0 has arrived. Miniaturisation and
the IoT has allowed sensors to be everywhere, recording data and reporting back.
From drones tracking weather patterns to activity monitors on animals, when used
correctly this data is increasingly enabling farmers to produce more with less.
With private sector investment in food and agriculture innovation on the increase we
have investigated technology growth in one of the largest subsectors: dairy farming.
From the expansive green pastures of New Zealand through to the barns and fields of
Europe and to the ‘mega’ farms of China, the IoT is beginning to crop up.

Sometimes known as ‘precision dairy’, the IoT led Productivity – Global agricultural production will need
revolution in dairy farming practices employs both sensor to double by 2050 to meet growing demand. However,
based tools to identify and manage animal needs and resource constraints will require this demand be met through
robotics to automate farm processes. We estimate that improvements in farm yield (circa 25% globally) as opposed
precision dairy is currently touching around 2.5 million to straight expansion.
dairy cows out of a total global population of more than 250
million. These 2.5 million cows are concentrated in six of Efficiency – Much like other supply chains, volatility of input
the top seven milk producing regions of the world (the EU, prices and falling margins on commoditised products are
the US, China, Brazil, Russia and New Zealand). With at driving the need for efficient and optimised operations.
least another 60 million untouched by technology in these
It is the combination of these factors that has been driving
high producing regions – let alone the rest of the world – the
farmers towards technology. With uptake of precision
market is still full of opportunity.
dairy nearing the tipping point between early adopters and
These high producing regions have been hotspots for widespread adoption, we set out to understand the growth
precision dairy uptake in part due to significant production potential in this industry.
pressure. Two key characteristics of the dairy market are set
This report provides an overview of the most interesting
to continue driving this pressure for the foreseeable future:
technologies available for dairy farms – from the more
Strong demand growth – Particularly from emerging established to the cutting edge. We look first at the drivers
markets has put increasing pressure on established producers of the dairy industry and why technology will be integral
and is driving an attractive export market. to the future success of dairy farms. This is followed by a
deep dive into some of the technologies with the greatest
Government protection – Concerns over food security and the near term growth potential. Lastly, we go on to look at
sustainability of staple categories have governments prioritising key competitive dynamics currently at play. Given the
investment in dairy on their agendas. importance of different farming practices globally, an
appendix profiles key producing geographies poised for
Though these trends reflect positive demand, dairy farmers are growth in the near term.
price takers and their margins are constantly being squeezed
by retailers expecting ever-increasing productivity. In order
to remain profitable when faced with tightening margins and
countless other production challenges (extreme weather, rising 663m c.70%
input costs, and labour shortages to name a few) dairy farms are 282m tonnes of cow’s production from
fundamentally rethinking their model. cows worldwide milk produced in only 50% of
2013 cows
Professionalisation – Sustenance farming is giving way to
larger, industrial operations due to consolidation pressure
from governments and the search for economies of scale.
world population
growth to 36%
increase dairy
8bn demand by
by 2024 2024

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 3

Dairy industry dynamics

Dairy consumption is closely correlated to economic development. With a

burgeoning middle class and increased awareness of nutrition in emerging markets,
demand for dairy has never been higher.

Growing demand and production shift They have leveraged the fact that they have some of the
Though overall demand for dairy is positive, production largest dairy cow populations in the world. Thanks to
capacity of emerging markets is a growing issue. Many availability of land, they have been able to scale farms
are ill-equipped to meet demand as they have historically beyond those found in mature geographies and given
relied on fragmented networks of sustenance farms (families rise to the ‘mega farm’ concept (farms with herds greater
with 1-2 cows) to serve local communities. Increasing than 1,000, many with more than 5,000). The full impact
urbanisation has only exacerbated the issue and necessitates of productivity gains of the mega farms is beginning to
fundamental changes to both farm production and dairy show through, though on average it is still masked by large
supply chain infrastructure. volumes of legacy sustenance farms.

To meet demand without relying on imports, some Figure 1 and 2: Expected portion of global
countries have been working to rapidly transform their production by region 2010 – 2020 (tons)
dairy industries. China’s industry in particular has become
significantly more sophisticated over the last five years 2010 2020
and has adopted and evolved best practices from mature
production markets such as the EU, New Zealand and the 3.8% 4.0%
US. Russia, Turkey and increasingly Brazil are following 26.4%
26.6% 18.5%
in China’s footsteps. The success of their efforts thus far 21.3%
are evident in the increasing share of global production
estimated for BRICs by 2020 (see figure 1). T692m T827m

Average herd size and its impact on productivity 15.3% 14.7%

33.0%
Dairy production varies significantly by country and is 36.4%
not proportionate to the size of the country’s dairy cow
population due to large variations in yield achieved per
cow. Average herd size provides the best indication of
the sophistication and productivity of a dairy market (see BRICs EU ANZ Rest of World North America
figure 2). Immature dairy markets (commonly found in
Africa and Asia) have small average herd sizes due to high
volumes of low productivity sustenance farms. Mature,
more sophisticated markets have average herd sizes over 40 –
largely accepted as the critical mass required for investment
in professionalising operations and technology.

Consolidation and ‘mega farms’

Herd sizes have been increasing across mature milk
producing regions over the last 75 years as milk
manufacturers have put in place infrastructure that allows
farms to produce for more than just for local demand.
Though rates of farm consolidation have slowed somewhat,
the EU is expecting a spike in consolidation when quotas are
removed in 2015 and farms will either look to grow or exit
the industry. China, Russia and Turkey are the most recent
countries to have begun consolidating to take advantage of
economies of scale.

4 Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry

Figure 3: Average herd size and farm productivity comparison across regions

Yield per cow

EU
(tons/year)
professional, smaller barn-housed
12 farms with lower average herd size
Israel due to space.

11
North America
larger, productive average herd
10 United States size though disparity across
regions.
9 Canada
Denmark ANZ
8 larger, professional farms, lower
United Kingdom productivity due to seasonal
Germany milking.
7 Netherlands
France
BRICs + Turkey
6 Italy rapidly growing class of 'mega
Argentina farms', still large volumes of
Poland
5 Australia sustenance farms.
Ukraine
4 Russia New Zealand Rest of World
sustenance farming, very low level
3 Turkey Columbia of professionalisation.
India Pakistan
China Kenya
2
Tanzania Israel
Brazil
Sudan leads milk yield worldwide and
1
Bangladesh leads in dairy technology
Ethiopia innovation.
0
0 20 40 60 80 100 120 140 160 180 200 220 240 260 420 440

Average dairy herd size

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 5

Key industry drivers and differences in
farming practices
Changes in farm structure as a response to the growing need for efficiency,
productivity and sustainability have a compounding effect in ensuring the future
uptake of technology. However, technology innovators need to be sensitive
to differences in farming practices To increase the rate of dairy-tech sales, the
technology needs to be customised to local conditions and farm management styles

The attractiveness of the precision dairy tech market for Domestic protectionism – Interest in reducing export
investors will depend on its potential to grow – and grow dependence has led to heavy subsidisation of local
quickly – in the near term. production and created considerable grants for investment in
productivity enhancing technologies.
Uptake to date has been driven by mature markets where
the dairy industry has been professionalised and farms 3. Consolidation
have encountered pressure from grocery retailers and Economies of scale – To benefit from scale, dairy farms
dairy manufacturers to streamline operations and ensure
are either expanding or exiting the industry. Increasingly
consistency in quality and quantity. Precision dairy has
they fall under one of two categories: industrial mega
been the answer for many in meeting these challenges and
has established a large base of early adopters in key dairy farms (herds >1000) which compete on a volume basis
producing markets such as the EU and US. Emerging markets and employ factory-like farm management practices, and
such as China, Brazil and Russia have begun to feel similar professional farms (herds >50) which compete on the basis
pressures and rapid farm consolidation in these countries has of optimisation and enhanced yields.
added another driver for precision dairy.
Vertical integration – The power of dairy manufacturers
In highly conservative industries such as farming, uptake of is growing and so are their demands for quality and
new technology can be slow initially but rapidly accelerates consistency. To secure their supply, vertical integration is
once a critical mass is reached. Precision dairy has reached increasingly common, particularly across BRICs, with the
this tipping point in several mature markets and the case for likes of dairy giants Nestle and Fonterra buying up farms.
widespread adoption is further supported by five key market
drivers that impact farms for the foreseeable future. 4. Productivity
Optimising yield – Whilst farmers are able to improve
Five key market drivers
production yield by increasing inputs, this also comes at a
1. Strong demand growth high cost. Finding the optimal trade-off between increased
Emerging market demand – Dairy is transitioning from inputs and higher yield can be better achieved with data
a regulated supply-led market to being a demand driven analysis through precision dairy.
product. Sustenance farming can no longer support demand
Every cow counts – In mature markets with already high
in emerging countries and quotas are decreasing.
yields, quick wins for overall farm management such as
Export market & free trade – Disparity in milk production streamlined processes and maximised milking throughput
between developing and mature dairy markets is only have often already been sought. Farmers are now turning
expanding as technology takes hold. Quota abolitions and their attention to the monitoring of each cow and
free trade agreements are levelling the playing field across maximising productivity on an individual basis.
borders and forcing farms to be as competitive as possible to
5. Efficiencies
gain share in the export market.
Lack of resources and sustainability – Though agricultural
2. Government intervention production needs to double, limited availability of land,
Food security – Concerns over security and quality of supply depletion of natural resources and environmental issues
has governments focused on avoiding situations similar to such as effluent disposal and deforestation are constraining
the 2008 Melamine scandal in China. The result has been expansion of livestock production. Consequently, more
enforced industry professionalisation, providing funding and needs to come from less and alternatives methods for yield
incentives for consolidation of farms. improvement are increasingly sought.

6 Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry

Controlling costs – Farmers do not have any control over the 2. Farm style, calving & milking choices
prices they receive for raw milk but must incur volatile costs Farming setup – The way cows are housed and fed on a
for production inputs (e.g. corn). Technology can help farms farm depends on a number of factors including climate and
better understand and manage inputs in a cost effective way. individual preference. Technology is often optimised for a
particular style and what works in pasture farms is often not
Evaluating the many available options suited to barns and vice versa:
Whilst technology will clearly be integral in the dairy farm of
the future, the current options available are not ‘one size fits • Barn – Year round housing, limited access to pasture; uses
all’. Significant differences exist in farming practices across more costly silage and mixed ration feed.
geographies and even between farms in the same region.
The technology that works for one may not necessarily suit • Pasture – All weather outdoors, extensive grazing
another, either due to the farm set up or the farm workers, leveraging availability of space and quality grass feed.
because usage relies on operator understanding and making
decisions based on the large volumes of data produced. • Mixed – Moderate grazing supplemented by barn feeding,
wintered indoors.
It is therefore important for technology companies to
carefully consider the design and flexibility of products to Calving practices – Whether calving is done in blocks on
meet the demands of various farming practices. Likewise, it is a seasonal basis (both Spring and Autumn or once a year
critical that investors do their due diligence and are aware of for the herd) or continuously through the year influences
the differences that can impact a precision dairy technology’s
methods for monitoring health and fertility which impacts
potential success on the market.
data analysis and monitoring equipment required.
Key differences in farming practices at a glance Milking parlour setup – The setup and infrastructure in a
1. Farm management and professionalisation
milking barn influences what type of technology a farmer
Herd size – The current and planned level of farm
will choose to augment their current systems. Parlours are
consolidation in a region provides a good indication of
expensive and changed only once every 15-20 years (or in
readiness to adopt technology. As farms increase in size,
the event of consolidation) though emerging dairy markets
automation and monitoring technologies become more
implement parlour infrastructure at a higher rate. The main
attractive. A high predominance of small lifestyle farms in a
parlour types are:
region indicates a market not ready for or willing to invest
in widespread adoption of technology. By contrast very • Herringbone or side-by-side – Stalls in rows angled or
large average herd sizes indicate industrialised farm practices perpendicular to milking area. Suited to traditional barn
looking for automation of operations and infrastructure. layouts, but higher throughput batch milking.
Whilst, those in the middle are often focused on achieving
optimisation over automation. • Rotary – Raised, circular rotating platform with cows
facing inwards. Quickest, suited to high throughput,
Availability and cost of labour – Despite the potential of efficient batch milking.
technology, an abundance of cheap labour can often be an
inhibitor of uptake. Likewise, a lack of skilled labour and • Free stall – Open layout with unrestricted movement,
high labour costs are key drivers in developed markets such required for automated robots and voluntary milking.
as Germany, Denmark and the UK. Farms in these areas
with between 60-200 cows are often at the intersection of
family farming and professional operations and rely on
technology to supplement labour resources.

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 7

Managing farm productivity with
infrastructure & mechanisation
Relatively unchanged for decades, farming has been slower Tech to watch
than other industries to embrace technology. Similar to the
manufacturing world, the first generation of technology has
come in the form of equipment and infrastructure to scale
production. Mechanisation and automation has allowed PREP AND Rising and cleaning systems standardise
farms to leverage technology and reallocate labour to the SANISTATION pre and post-milking santisation and
improve parlour productivity.
more complex aspects of farm management that cannot
be automated.

What began as simple equipment to augment hand milking

has now evolved into a network of automated infrastructure
that can manage the end to end milk production process with
MILK Quality analysis and classification at point
little to no human intervention. From milking to corralling of milking and subsequent diversion of
SORTING
to feeding, various technologies have brought industrial milk flow to different tanks.
scale automation to dairies and increased both throughput
of cows through milking parlours and labour efficiencies.
The newest milking ‘robots’ are prime examples of machine
to machine (M2M) communication between milking and
feeding infrastructure and are revolutionising dairy farming
Fully automated preparation, sanitisation
practices in barns across Western Europe – with strong MILKING
and milking of cows in barn by robotics.
uptake in countries such as the Netherlands, UK, France and ROBOTS
Germany, as well as Scandinavia.

WASTE Anaerobic digestion tanks (or similar

MANAGEMENT alternatives) convert agricultural waste
into useable products for resale.

Enhancement to aurtomated mass feeding

INDIVIDUAL systems, intelligent software allocates
FEEDING feed individually and in real time according
to historical cow data.

COW SORTING Fully-automated sorting system for

(AUTOMATED herding. Remotely select cows to be
DRAFTING) segregated based on factor (weight, heat,
injury).

8 Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry

Deep dive: Infrastructure mechanisation

Voluntary milking robots Automated rotary milking ‘Drafting’

One of the high growth Robotics tailored to rotary ‘Automated drafting’ – the
technologies, voluntary milking parlours have been trialled in sorting of cows based on a set of
systems (VMS) have gained Australia and New Zealand in predefined parameters as they pass
significant traction in Europe recent years and have garnered through fencing barriers in the
in recent years with penetration significant interest as they are barn – is the single most popular
highest in the Netherlands and anticipated to suit pasture based technology to be adopted in the
Scandinavia but with the UK farming systems common in the southern hemisphere. Due to their
and France catching up. VMS southern hemisphere. higher than average herd sizes and
enables cows to voluntarily professional farming operations
approach robots for milking up These farms have larger herd sizes with lean staffing, the ability to
to four times a day, according and favour parlour setups allowing automatically identify and select
to their biological needs, rather for batch milking (e.g. rotaries) cows that need individual attention
than endure batch milking on the with much higher throughput simplifies both the locating and
farmer’s schedule. This allows for levels. Automated rotary systems physical corralling processes.
a considerable reduction in farm will serve to enhance this.
labour and the increased frequency Sophisticated drafting systems
These robots require significant are beginning to leverage M2M
of milking can lead to significantly
investment, but are likely to communication. Many are now
higher productivity. Robots are
become far more popular than set up to go beyond hardcoded
also seen to enhance well-being as
the traditional milking robots sorting parameters or manual
cows choose when they want to
favoured in smaller European intervention to select cows and
be milked and problems such as
farms. increasingly allow data collected
udder distension are reduced.
from other farm infrastructure to
Like VMS, they employ sensors
Most VMS integrate new sensor trigger selection in real time. Other
and M2M technology to identify
technology and employ M2M machines communicating data
individual cows and adjust their
communication to automate other are commonly walk-over weight
machine behaviour to specific
aspects of farm management such readers or heat detecting devices
needs. Most commonly, this
as measuring and distributing feed and the drafting system is able
includes identifying udder
rations based on individual cow to determine based on the data,
placement, adjusting milking
needs. which cows need to be drafted.
volume based on real time
VMS are mainly suitable for analysis, and monitoring and
complete indoor or partial indoor communicating disease or health
farming systems and for herds warnings.
from 50-500 cows (one robot
serves 60-70 cows). They are not
currently perceived as a viable
option for large farms (>500 herd)
or for pasture based herds that
are not housed indoors during
lactation periods.

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 9

Monitoring and managing each cow
individually
Though automated infrastructure is integral to enabling Tech to watch
farms to manage larger herds, get more cows through
parlours with fewer employees and ensure greater
consistency in production, perhaps more exciting (and less
capital intensive for farms) are the newer devices the IoT has HEAT Ankle, collar or ear tags monitor activity
given rise to – tech that is all about the cow. MONITORING related to heats and identify optimal
windows for artificial insemination
To simplify a very complex process, there are three factors
that dairy farmers can monitor and manage to improve
performance: feeding, fertility and health. Devices for
monitoring and managing individual cows in each of these
three areas allow for unprecedented precision in individual Monitor behaviours such as rumination,
HEALTH
care and allow farmers to optimise yield on a cow by cow MONITORING feeding, head position and restlessness
basis. and identify disease, lameness and other
health indicators.
Sensors provide continuous streams of data via NFC on
everything from milk, heat, waste, activity, fever or toxins.
This data can be stored locally and uploaded into cloud
based management systems for remote monitoring and
enables farmers to make real time data-based decisions for Sensors monitor milking in real time to
MILK
identify and track quality and health issues
significantly improved reproductive performance and cow MONITORING
(e.g. mastitis).
health management, though intelligent software to manage
data overload is a growing gap for tech providers to fill.

WEIGHT Walk over scales in parlours monitor

MONITORING weight and provide analysis for feeding
strategies.

CALVING Monitor progress of pregnant cows and

MONITORING alert to impending labour.

HERD Aggregation of all monitoring data to

MANAGEMENT cloud-based storage for reporting. Intelli-
gent software to identify trends and track
cow and herd statistics.

10 Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry

Deep dive: Sensor driven management

Heat monitoring Health monitoring Herd management

Accurate heat detection has a More recent than heat detection, As with all ‘big data’ technology -
clear and proven cost benefit, health monitoring technology herd management has the potential
with extended calving intervals is still finding its feet. Health to revolutionise decision making.
estimated to cost farmers £3.50- monitoring also employs sensors to Previously, herd management
4.00 per cow per day. track movement, bodily functions software provided farmers with
– everything from rumen bolus the ability to manually input and
Increasingly sophisticated to PH testing – and provide an store records digitally and track
technologies have been introduced overall health assessment for each performance, though many chose
to improve heat detection accuracy cow. Systems can alert the farmer to maintain paper records as
and overall herd fertility which to afflictions such as lameness, benefits were not significant.
has a significant impact on farm acidosis and mastitis, conditions
productivity. Systems take the which are more treatable when However, with the influx of
form of tags (fitted to the neck, detected early. sensors monitoring heat, health,
ankle or ear of the cow) which milk, quality and production
monitor activity and transmit data Unlike heat monitoring, the statistics, data can be sent in
to a reader system which alerts the output of which is a clear real time or at intervals to hubs
farmer to a window for artificial instruction ‘cow X is ready for where advanced software is
insemination. artificial insemination’, many able to aggregate and interpret
farmers feel that health monitoring data from a variety of sources
Pioneered by two Israeli does not currently produce to provide farmers with greater,
companies, Afimilk and SCR actionable data – something tech more meaningful insights than
Dairy, heat detection technology providers are currently working ever before.
has seen strong uptake in some of to remedy.
the more developed dairy markets Drilling down to individual
such as Denmark, the Netherlands Uptake of this technology will be cow performance and viewing
and the UK (where it is used by driven by the provider’s ability herd performance in aggregate
35-40% of farms) and is now to interpret and prioritise health allows farmers to understand
starting to gain traction in other data for farmers and turn it into and manage both micro and
large European dairy markets such actionable information. Cow macro trends, milk anomalies
as Germany and France as well as health is complex and currently, and early stage disease epidemics,
key scale markets such as the US there is a feeling amongst farmers and act accordingly. Like health
and China. that there is “data overload”. monitoring technology, the success
However, most accept that having of herd management will lie in the
The technology is most suitable health data in an understandable presentation of, and the analytics
for indoor or partial indoor format would be tremendously used to interpret, the data.
farming systems, and farms with beneficial to their operations.
herd size <1,000. The algorithms
of HD technologies have yet to be
successfully adapted for pasture
based herds.

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 11

Emerging competition in dairy tech

The convergence of farming infrastructure giants and small innovative tech houses
has begun in precision dairy. Continued availability of funding for early stage
companies has competition heating up between a growing number of niche players
and established equipment manufacturers making build or buy decisions to join the
fight for share in the precision dairy market.
Farming infrastructure giants Future of investment
Traditional OEMs DeLaval, GEA, BouMatic, Fullwood Venture capital and seed funding continues to propel
and Dairymaster are household names when it comes innovative start ups in this space. AgTech is in the process
to dairy farming infrastructure and equipment and of raising a new $50m fund and, even back in the midst of
their brand recognition is strong. However, like many the crisis, herd management software startup Farmeron
manufacturers, innovation by these companies to date was able to raise $4m in seed financing in 2010 whilst
has been limited and has given rise to a new wave of tech Cultivan Ventures, another VC began investing in 2009
companies entering the space. with a $34m fund and is in the process of raising its second
fund in partnership with Sandbox planned at $150m with
Lely is the first OEM in this sector which is essentially $70m already committed. Earlier this year, Silent Herdsman
a tech company. Having pioneered the milking robot, it (heat detection collar system) raised £3M in funding from
sells only that and continues to spurn traditional parlour an investor syndicate led by Scottish Equity Partners.
equipment with considerable success. Early rounds of innovators who have had time to become
established players are certainly attracting interest for next
Niche technology companies
stage growth funding.
The number of tech companies working at the junction of
the IoT, new sensing technology, analytics and agriculture OEMs have also been focusing R&D efforts on developing
has grown rapidly in the last decade. Venture capital in this proprietary technologies. Ireland based Dairymaster has, in
area has been significant and the early success stories have recent years, developed its own automated feeding systems
now grown into serious competitors in the space. and heat and health monitoring systems.
Success by a few in shaping the market along with the Given the success achieved by these niche players, the
continued miniaturisation of sensing technology has paved infrastructure giants have been increasingly turning their
the way for others to enter and competition is now heating attentions to the technology arena. Historically, they chose
up. Some of the more established technologies like heat to partner with these small specialty manufacturers to
monitoring – led by two Israeli tech companies Afimilk provide add on products to complement their milking and
and SCR – are now seeing a wave of new competition, from parlour infrastructure. However, many have now decided to
recent entrants such as UK based Silent Herdsman and ICE enter the industry themselves and are making build or buy
Robotics, Dutch company Agis and the Austrian brand decisions to develop their technology offering.
SmartBow.
In 2013, world leading dairy equipment manufacturer
Figure 3 sets out some of the major players, both established DeLaval acquired Dutch dairy management software
and emerging, in the dairy-tech industry. company Uniform-Agri (the largest such provider in
Europe) and at the end of 2012, GEA Group acquired New
Zealand based dairy technology company Milflos which
focuses on technologies for pasture based farming systems.

Most recently, Allflex, a cow tags manufacturer owned by

BC Partners, acquired SCR Dairy.

12 Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry

Key market players
Product focus
Company Founded in Established Ownership Sensors/ Data and
Infrastructure
hardware software
Private (part of Tetra Laval
DeLaval Sweden 1883   
group)
LIC New Zealand 1909 Cooperative (farmer owned)   

GEA Germany 1926 Public (part of GEA Group)   

Largely global
Nedap Netherlands 1929 Public   (some regional) farm
BouMatic Belgium 1939 Private    infrastructure and
equipment giants
Private (part of Fullwood
Fullwood UK 1940   
Packo Group)
Lely Netherlands 1948 Private   

DairyMaster Ireland 1968 Private   

SCR Dairy Israel 1976 Part of Allflex, PE owned  

Precision dairy
Part PE owned, part kibbutz pioneers
Afimilk Israel 1977  
owned
Waikato New Zealand 1978 Private    Regional farm infra-
Part of Hokofarm Holding structure providers,
Insentec BV Netherlands 1979    expanding
Group
Sum-It UK 1983 Private 

Agis Netherlands 1984 Private  

Orchid Farm Tech UK 1984 Private 

Dairy One US 1997 Cooperative (not for profit)  Second movers

in precision dairy,
ENGS Israel 2000 Private    mixed market entry
strategies, some
ICE Robotics UK 2002 Private   
infrastructure and
FarmWizard US 2004 Private  equipment, some
software focuseds
eCow UK 2007 Private  
Private (part of MKW Elec-
SmartBow Austria 2009  
tronics)
Silent herdsman UK 2009 Private, VC backed  

Farmeron Croatia 2010 Private, VC backed  Most recent joiners

to market, innovating
Stellapps India 2011 Private, VC backed   more established
monitoring technolo-
Cattlesense Israel 2012 Private, VC backed   gy with well rounded
software packages
miRobots Israel 2013 Private, VC backed   

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 13

Appendix:
Profiles of key dairy producing geographies
Dairy cow populations & key milk
producing economies
The 20 largest dairy cow populations worldwide are not necessarily the largest
producers. The top 20 ranked dairy producers largely succeed on the basis of higher
productivity per cow
Figure 4: The top 20 ranked dairy producers plus additional countries with top 20 cow populations

91

54

45

37

32 31 30

24
22
20
16 15
12 14 13
12 12 12 11 11
11 11 10 11
9 8 9 8 7 7 7
5 5 5 6
4 3 5 4 4 4 4 4 4
2 2 2 2 3 2 2 2 2 2
1 1 1 1
USA

India

China

Brazil

Russia

Germany

France

New Zealand

Turkey

UK

Pakistan

Poland

Argentina

Netherlands

Ukraine

Mexico

Italy

Australia

Canada

Japan

Uzbekistan

Colombia

Sudan

Ethiopia

Kenya

Tanzania

Afghanistan

Uganda

Bangladesh

Population (m heads) Production (m tons)

The core of the dairy industry lies in the top 20 producing BRIC markets are unique in that they have large populations
nations. There are 9 countries which make the list of top and production volumes, but historically have had low levels
20 population but have some of the lowest production in of productivity per cow. They are poised to leapfrog mature
the world. The dairy industry in these countries is either dairy markets in production if they are able to adopt the best
immature or non existent, and is typically reliant on family of farming practices and deploy them on increasingly popular
sustenance farms that produce for individual or local mega farms.
consumption. These countries often lack the infrastructure
for production and processing facilities, or a consolidated
dairy product industry.

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 15

Demand and supply trends in key dairy
markets

0.9% 0.4%

United Kingdom

0.8% 0.8% 0.2% 1.4%

Netherlands
Canada

0.7% 0.4%

France

0.6% 1.4%

United States

0.8% 0.8%

Mexico
0.2% - 0.1%
Columbia

5.2% 4.4%

Brazil

Production and demand across key milk

production or cow population countries
1.7% 2.6%
varies greatly, with demand growth static
in many established markets and growing Argentina

on a par or faster than production in

emerging markets.
16 Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry
 Demand Production
Volume
1.6%
0.8% Growth 2008-2013

Germany

1.0%

- 0.3% 0.3%

Ukraine - 1.0%
0.7%
Russia
Poland - 0.4%

Japan
0.6% 7.6% 7.6%
3.2% - 0.4%
Uzbekistan - 1.1%
- 0.7% 10.3% 10.6%
Italy Turkey
- 1.1%
China

3.3%
5.3% 5.6% 1.5%

Bangladesh

East Africa*

4.1% 4.2% 5.1%

0.9%
India**
- 0.4% New Zealand
Australia

- 7.8%

*East Africa includes Africa’s largest milk producing countries: Sudan Ethiopia, Kenya, Tanzania, Uganda
**India and Pakistan demand and production include buffalo milk which contributes over 50% of demand and supply

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 17

Professional mid-sized farming operations:
Europe
United Kingdom Netherlands Denmark
Cow population: 1.8 m Cow population: 1.5 m Cow population: 587 k
Number of farms: 13,250 Number of farms: 18,500 Number of farms: 3,800
Average herd size: 123 Average herd size: 84 Average herd size: 155
Average yield per cow (tons/year): 7.7 Average yield per cow (tons/year): 7.6 Average yield per cow (tons/year): 8.5

• Strong farm consolidation over the • High incidence of intensive indoor • Denmark has the largest average
past 10 years with a 43% decline in farming, in part due to space herd size of any European country.
farm numbers. limitations.
• Intensive indoor farming is the most
• Large herd sizes (for Europe), • Home of the Lely Astronaut (the common system (70-80% farms)
increasing shortage of skilled labour market leading milking robot) but there is also a sizeable organic
and farmer openness to technology and of Nedap the second largest segment.
make the UK fertile ground for heat detection player globally, the
technology adoption. Netherlands is one of the most • Current priority is on improving
developed countries worldwide farm efficiency and profitability –
• Robots now account for over half of in terms of dairy technology dairy famers are under significant
new installations and heat detection penetration. financial pressure.
technology is used by nearly 40% of
farmers. High milk prices and Farm • Robots are used by >20% dairy • Denmark is the most developed
and Forestry Improvement Scheme farms and account for over half market in Europe for heat detection
grants have boosted investment. of annual milking equipment technology, used by c 50% of dairy
sales. CRV, the largest artificial farms and also has high adoption of
• Current priority is on enhancing insemination cooperative, has been robots.
yields and reducing the risk of pursuing standalone sales of heat
having to rely on unskilled/ • Recent financial pressure has led to
detection technology since 2011
temporary labour. a slowdown in investment and there
with considerable success and its
is continued uncertainty over milk
herd management solutions are now
• Health monitoring and cloud-based price. Farm numbers are anticipated
also gaining traction.
Herd Management are key future to decline due to the high average
growth areas. • Current priority is on expanding age of farmers and lack of succession
farms and increasing productivity in plans.
• Uncertainty over milk price in the
anticipation of EU quota removal.
short to medium term may put • Abolition of EU quotas is
some investment on hold but long • As dairy farmers ramp up expected to lead to larger farms,
term indicators are positive. production with the removal of increasing production and driving
quotas, investment in technology efficiencies – with continued
is expected to grow. investment in technology for their
expanding herds.

18 Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry

France Germany
Cow population: 3.6 m Cow population: 4.2 m
Number of farms: 70,000 Number of farms: 82,900
Average herd size: 52 Average herd size: 51
Average yield per cow (tons/year): 6.6 Average yield per cow (tons/year): 7.3

• Fragmented farm base, although • Fragmented farm base with a strong

some consolidation has been taking trend to consolidation.
place.
• Herd size varies greatly by region –
• Partial indoor farming most former East German States have much
common. Complete indoor farming larger farms (average herd size in
used for some larger herds. Brandenburg is 211).

• The highly fragmented nature • A wave of parlour modernisation

of the farm structure in France programmes, mostly in the Eastern
has presented a barrier to France Federal states, has led to a surge
following the rapid technology in uptake of technology with the
adoption pattern of the more large dairy farmers opting for fully
consolidated Northern European integrated systems.
countries.
• Fragmentation of farm base and the
• However, investment in robotic geographic organisation / regional
milking has accelerated in the past differences have been inhibitor to
2-3 years and robots account for rapid uptake with penetration varying
two thirds of equipment sales in significantly across states.
some regions (eg Loraine). There are
signs that heat detection technology • The removal of EU quotas is
will see strong growth boosted by projected to accelerate consolidation
support from the leading genetics and this, combined with high
company, Evolution, which is labour costs, will be a major
marketing the products. factor in driving further uptake of
technology. Health monitoring is
expected to be a key tech growth
area.

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 19

Successful but diverse northern and southern
hemisphere farming: Oceania and Americas
New Zealand management in the ‘pit’ (pre/post farm infrastructure must be hardier
Cow population: 5 m milking holding areas). than in other climates. This has
Number of farms: 11,891 perpetuated interest in year round
Average herd size: 421 • Most popular technologies have housing, but the cost implications
Average yield per cow (tons/year): 4.0 included automated add-ons to of leaving pasture feeding are
parlours that provide monitoring significant.
• 98% of New Zealand’s dairy is capabilities (e.g. walk-over
exported with the single largest weighing scales and walk-through • Connectivity issues in rural areas
trade partner being China. Export heat detection stations with are greater in Australia compared to
volumes drive profitability of farms cameras) which are integrated with other developed nations due to the
relative to other markets. drafting to optimise monitoring sheer volume of land that Australia
of cows when in barn, making encompasses; this has limited the
• At just over 400, the average herd the identification, locating and uptake of data heavy technology.
size in New Zealand is the highest corralling cows with issues easier.
amongst the developed dairy Dedicated technology for other • Farms exhibit a preference for
markets. seasonal calving issues developed uptake of technology that automates
in New Zealand is also popular infrastructure and replaces labour
• Pasture based farming is the norm within the milking parlour or
and minimises exposure to volatile and supports large volumes
of cows in labour and calving around the farm, but not those
feed prices, forming part of the that aid in management or decision
competitive advantage for farms concurrently (eg preventing
mismothering). making. Additionally, those
based in New Zealand. technologies that have not yet been
• Seasonal calving is practiced almost Australia optimised for pasture based systems
exclusively and the combination of Cow population: 1.7 m (eg voluntary milking robots or
calving and grazing is often referred Number of farms: c.6,700 heat detection sensors) are not yet
Average herd size: 250 proven and have had slower uptake,
to as ‘NZ style’ farming. This style
Average yield per cow (tons/year): 5.6 though this is likely to increase in
requires unique practices and tech
to manage concentrated periods the near future.
• 40% of Australia’s dairy is exported
of calving as well as monitoring of (a 22% increase from 2013) with • Government support for
cows who spend little time in barns. China, Japan, Singapore, Malaysia technology and farm management
and Indonesia being the largest innovation is high as in New
• Much of the technology employed
partners. These high export volumes Zealand and, with the growing
elsewhere (eg milking robots,
have helped to maintain higher attractiveness of the nearby
individual feeding) is not yet
profitability in comparison to other Chinese export market, greater
optimised for the NZ system. Less
markets. attention and funding is being
than one third of NZ farms practise
barn based feeding and, of those devoted to improving productivity
• Similar to New Zealand but less and supply with technology.
that do, only a very small portion space constrained, Australian
have chosen a system that allows farming is largely pasture based to
for individualised feeding. Lack of reduce exposure to volatile feed
barn time and individual feeding prices.
makes milking robots less practical
to employ. • Unlike New Zealand, calving
practices have seen a shift from
• Due to large herd sizes, farms have seasonal to split or year round,
been keen to adopt technology, creating demand for additional
but only those that improve tech to support year round heat
infrastructure and simplify detection.
management of large volumes of
cows at once, such as improving • Extreme weather and disasters
throughput of milking parlours and including fire, drought and flood
are large concerns in Australia and

20 Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry

United States managed by family labour but technologies will depend on parlour
Cow population: 9.2 m are now growing and farms are upgrade cycles as the benefits case is
Number of farms: 59,000 increasingly looking for automation insufficient to accelerate upgrades.
Average herd size: 196 to lessen reliance on skilled labour.
Average yield per cow (tons/year): 9.8 • Government investment in review
• Larger herd sizes in California of dairy technology efficacy is
• Farm size varies greatly across and Idaho mean the focus for greater than in other countries,
states. The five largest producing technology investment is often perhaps second only to New
states account for over half of on meeting regulations associated Zealand. Government priority is
production: ‘mega farms’ are with high cow-density production to improve farm profitability and
common in California and Idaho (environmental concerns, effluent productivity given heavy subsidies
with average herd sizes over 1,000 disposal, minimum times on for farms and need to ensure monies
whilst Wisconsin, Pennsylvania pasture) and cheap but unskilled are well spent
and New York are characterised labour have farms looking for
by smaller farms with average herd tools to better manage high • Benchmarking against US farms
sizes of between 75-120. volumes of labour and cows and shows fertility and productivity is
produce detailed reporting. lower than it might be; however,
• Overall, 74% of dairy farms have supply restrictions limit the desire
<100 cows but farms with more Canada to optimise or use technology
than 100 cows produce 85% Cow population: 950 k as investment in incremental
milk, which is driving further Number of farms: 11,962 improvements may not be
consolidation. There has been a Average herd size: 80 profitable when overall supply is
61% decrease in dairy farming Average yield per cow (tons/year): 8.8 capped.
operations since 1992.
• Dairy is a highly protected industry
• Seasonal, block and all year round in Canada with heavy import tariffs
calving are practised, and a mixed and restrictive supply management.
farm style is most common due to
the varied climates across states. • Herd sizes are smaller than the US,
with the majority of farms being
• Technology has seen some uptake family run or small professional
with voluntary milking robots and operations.
an assortment of activity monitoring
technology; however, compared to • Farm size has made Canadian farms
Europe this has been slow likely due ideal for robotic milking and the
to several poor years of profitability technology has seen a rapid uptake
for farms, the availability of cheap in some areas with approximately
(if unskilled) labour throughout 150 of the roughly 4,000 farms in
many states and the lack of Ontario (Canada’s 2nd largest dairy
regulation on the use of hormones farming province) adopting robots
to promote fertility. in the last three years.

• There is great interest in technology • Research in Ontario demonstrates

and estimates are that over 1m robots/precision dairy methods
cows in the US will be tracked by allow family farms to manage
software in 2015, four times more herd sizes of c. 140 cows without
than current reach. external labour which makes an
attractive investment case due to
• Availability of adequate labour labour shortages and expense.
is a greater issue in Wisconsin, It is estimated that 70% of new
Pennsylvania and New York installations are robots over
where herds have historically been parlours; however, uptake of these

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 21

Mega-farm industrialised operations: BRICs
and other emerging
China Russia Turkey
Cow population: 12.5 m Cow population: 8.5m Cow population: 5.2m
Number of farms: c 1.45m Number of farms: no recent data Number of farms: c 2.3m
Average herd size: 5 Average herd size: estimated <5 Average herd size: estimated <5
Average yield per cow (tons/year): 3.0 Average yield per cow (tons/year): 3.9 Average yield per cow (tons/year): 3.0

• Post the 2008 melamine dairy • Uptake of technology in any • Fragmented dairy farm landscape
scandal, the Chinese farming capacity is low overall with a high proportion of
landscape has changed dramatically subsistence farming. Over 50% of
as the reputation of local brands • The farm base is fragmented with farms have herds of 10 or fewer.
was damaged heavily and the a high proportion of subsistence
government stepped in with the farming, though consolidation has • There has been consolidation in
advent of the “mega farm” concept, been taking place in recent years recent years with the emergence of
providing incentives for farm with the growth of professionalised large herds >500.
consolidation to secure quality farming and the emergence of large
herds (>1,000, similar to China) • There is a ban on milk imports to
supply. There are now 1.45m dairy
which have been promoted by Turkey which, combined with the
farms, down from >2.5m.
government. School Milk Project introduced in
• Herd sizes are polarised, with small 2012 (to provide free milk for >6
or single cow farms still accounting • There has been significant million children), has meant strong
for 50% of production (used in government support on developing domestic demand. The 2013 removal
rural consumption) and mega dairies the dairy industry, and imports of a European ban on Turkish
of herds >5,000 and (often >10,000) of high quality US genetics have milk exports has further boosted
operated by the state or corporates seen strong growth. The Russian production and 2014 production is
as vertically integrated supply government has set a target of 90% set to be 10% up on 2013.
chains. self-sufficiency for fluid milk by
2020 and the 2014 ban on EU dairy • There has been significant
• With mega farms often being run imports (in retaliation for sanctions) government focus and investment
from corporate headquarters, yields has further fuelled the need for in the agricultural sector for the past
and analysis on productivity are increased domestic production. 1-2 years and government grants
paramount. The latest monitoring will cover up to 65% of the cost of
technologies are being sought to • The current priority is on increasing new equipment.
ensure maximum profitability is yields and on improving milk
quality (a higher price is paid for • There has been strong uptake of
achieved as are new infrastructure
higher quality milk) which suggests technology among larger herds
technologies to manage large
technology adoption is set to (>500) in recent years supported
volumes of cows with less skilled
accelerate, though with a focus on by government financial aid and
labour.
infrastructure and mechanisation in the continued drive to improve
• Government funding for industrial the near term. standards and to embrace
style farms and technology European farming practices means
investment is great and farms a positive outlook for technology.
are keen to acquire technology.
However, farms often lack the
skills to understand reported
data or operate technology to
best result. ‘Model’ farms are
sponsored by the government
and provisioned for by the largest
brand names in farming equipment
to help instil best practices.

22 Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry

Brazil India
Cow population: 22.8m Cow population: 45m (115m incl. buffalo)
Number of farms: c 1.35m Number of farms: 75m (incl. buffalo)
Average herd size: 17 Average herd size: 2
Average yield per cow (tons/year): 1.4 Average yield per cow (tons/year): 1.2

• Brazil’s milk production growth has • Despite high volumes of milk

outpaced all others and, following production, India has the highest
in China’s footsteps, government number of farms in the world and
intervention has begun to ensure some of the worst productivity levels
consolidation and ‘mega farms’ are given the cow population.
the future of the industry.
• Dairy cow milk production of 54m
• Use of technology in any capacity is tonnes represents less than half (close
still very low: >80% of farms don’t to 44%) of India’s milk production,
even employ artificial insemination at the majority of which comes from
this stage and consolidation of farms buffalo.
is at a much earlier stage than China.
When consolidation ramps up, farms • India is the world’s largest consumer
will likely follow the patterns of of milk, and similar to other emerging
industrialisation in Russia and China. economies demand growth is
predicted to continue, though India
• Production volume growth has is better placed to meet this demand
not been a result of technology thanks to buffalo milk production
adoption but rather a result of quick volumes.
win operational improvements
along with consolidation and • Unlike other BRIC nations, little
industrialisation of processing. evidence exists of government
intervention to promote
• The next big thing is predicted to standardisation and consolidation.
be basic infrastructure for milking Support is instead directed at
and uptake in fixed time artificial providing rural dairy farming
insemination using hormones which families access to mainstream milk
will inhibit growth potential. processing facilities.

• Technology choices in the coming • Advanced technology is unlikely to

year by model farms sponsored be employed here for some time as
by the government will have a farms are too small and too labour-
significant impact on the future of intensive to benefit from existing
dairies. tech. Given the current state of dairy,
basic operational changes will prevail
in the near term.

Investing in the Internet of Things: Spotlight on agri-tech in the dairy industry 23

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