Elanco, a division of pharmaceutical manufacturer Eli Lilly, said that it had acquired the worldwide distribution and US production facilities of the Posliac brand for an initial fee of $300m, in an attempt to allay tightening milk supplies.
Posilac, a recombinant bovine growth hormone (rBGH) not permitted for use in the EU, has been used in milk production under Food and Drug Administration (FDA) approval since 1994, though is experiencing some consumer backlash of late.
Products like rBGH, or Recombinant bovine somatotropin (rBST), offer a synthetic variant of the naturally occurring hormone in the pituitary gland of cattle, which can be injected into a cow to increase milk production.
However, a growing number of dairy processors and retailers are seeking to add a "no-rbST" label in response to consumer demands for natural foods free from additives and other artificial added extras, leading to manufacturers and retailers like Starbucks to drop the milk from their operations.
While Monsanto failed to mention the recent US controversy over the labelling and use of rBGHs as a reason for divesting the business, the sale comes amidst come consumer backlash over the use of such products.
Elanco president Jeff Simmons said that he saw a promising future for the business as increasing global demand for dairy products both from established and emerging markets had led to higher commodity prices for manufacturers.
“With the purchase of Posilac, Elanco can enhance its overall product portfolio and work together with the industry to provide dairy farmers more options and give consumers affordable choices,” he stated. “Critically, we remain focused on the health and care of the cow in working with farmers to increase global milk supply.”
The company claims that with 14 years experience of safely selling the product in non-US dairy markets, it is well placed to adopt the entire global Posilac operations into its own business structure.
Despite the group’s optimism, the issue of using supplements like rBGH in dairy continues to court controversy, as some processors and retailers seek to label their products free from the hormones.
This has led to legal disputes between various stakeholders in the US state of Ohio over how products pertaining to be free of the hormone can be labelled, with current rules requiring the mention that there are no major differences to organically sourced milk.
Despite these difficulties,Carl Casale, executive vice-president for Monsanto’s strategy and operations, said although the company had no further details of its sell off plan, it hoped to ensure that Posilac remains supplied to farmers.
“We believe repositioning the operations with a strategic owner will allow Monsanto to focus on the growth of its core seeds and traits business while ensuring that loyal dairy farmers continue to receive the value of Posilac," he stated.
Latest labelling rules
Ohio state's new regulations, which came into effect on May 22, state that dairy companies can only include the statement "from cows not supplemented with artificial growth hormones" in their product labelling, if it is followed by the disclaimer, "no significant difference has been shown between milk derived from rBST-supplemented and non-rBST supplemented cows".
It also states the size, font, colour and location of the labelling, and requires that dairy processors alleged to have violated these provisions are subject to a range of penalties, fuelling a debate that has long been raging over the labelling of the hormones.
Organic producers and association say interfering with established acceptance for labelling products as free from growth hormones prevents consumers from receiving truthful information.
"The practical effect of the Ohio rule silences manufacturers of dairy products and prevents Ohioans from knowing whether artificial growth hormones have been used in dairy products," said Peggy Armstrong, communications director for the International Dairy Foods Association IDFA.
On the other side though, organisations such as Monsanto have previously claimed rBST-free labels mislead consumers into thinking they are superior to those from cows treated with the hormone.
Different states have different rules regarding the labelling of growth hormones in dairy products.
In February, the Utah Department of Agriculture and Food introduced proposals to prohibit dairy companies declaring their products as free from a growth hormone, again angering industry.
The previous month, a similar bill on organic milk labelling up for consideration in the Indiana House of Representatives came under criticism from organisations and producers claiming it would prevent informed consumer choice if passed.
At the same time, Pennsylvania decided against enforcing the ban on labelling organic milk using the absence claims.
The state's proposal would have prevented dairy companies saying their products were free from antibiotics and pesticides as well as rBGH.
The same month, coffee retailer Starbucks said it had removed all rBGH from its US network of stores.