Asia key to dairy expansion

Asia key to dairy expansion


Dairy
<strong>GO NORTH:</strong> Murray Goulburn managing director Gary Helou says Australia’s dairy industry must connect with Asia for a strong vibrant future.

GO NORTH: Murray Goulburn managing director Gary Helou says Australia’s dairy industry must connect with Asia for a strong vibrant future.

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MURRAY Goulburn's managing director Gary Helou says Asia - and particularly China - will remain the focus of the grower-owned co-operative for the next decade.

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MURRAY Goulburn's managing director Gary Helou says Asia - and particularly China - will remain the focus of the grower-owned co-operative for the next decade.

He said many Australian processors had failed to cash-in on the "raging growth" experienced in the region where demand continues to grow at between 5 per cent and 6pc per annum.

In a QA session with Fresh Agenda director Steve Spencer at Dairy SA's Dairy Innovation Day 2014 in Mount Gambier, Mr Helou said that in the past 10 years there had been too much concentration on the domestic market.

"Companies such as Fonterra, Arla and Friesland Campina, that backed Asia, have done very well," he said.

"Unfortunately, in Australia, we haven't and - as a consequence - we have declined while our competitors were pushing ahead."

MG was working to reverse the focus of its 3.2-billion litre business from 50pc domestic and 50pc export focus to (closer to) 75pc export and 25pc domestic.

Mr Helou said that being located on Asia's doorstep was not enough. Companies needed to deploy more resources on the ground in Asia, understand the products Asian consumers wanted, and supply them.

Two years ago, Murray Goulburn was the first Australian company to stake a position in China. It now had offices in Dubai, Vietnam Singapore and had taken over a business in China.

"We need to be knocking on the doors of the Coles and Woolworths equivalents of Indonesia and China," he said.

Any movement away from that (position) would mean that Australia remained hostage to Coles and Woolworths.

But Mr Helou said the duopoly was not the problem.

"You would do exactly what they are doing if you are in charge pushing for a lower cost of business to offer consumers the best possible value," he said.

"It is our problem that we have not ventured to expand to where the market is much more higher growth and promising."

MG's future strategy was investing in cutting-edge technology, innovation in new products and a reduction in its cost-of-production.

Mr Helou said the cooperative did not want to be a mass producer of commodities and had identified three key areas for value-adding milk into Asia: nutritional powders, consumer cheeses and dairy beverages.

He said that nutritional powders, particularly infant formula, were not subject to the same volatility as the cyclic fresh and powdered milk markets.

"Full cream milk powder sold last night for $3700 a tonne - lets call it $4000/t. Infant nutrition sells for $20,000/t and it is basically full cream milk powder, plus vitamins, nutrients and so on done to a very high level safety standard and canned," Mr Helou said.

"The cost add from a manufacturing point of view is not that much - it is the technology, the IP and trust you build with consumers (that is more important)."

MG was focused on producing cheese to Asian tastes - milder flavoured, individually wrapped and sliced to their requirements.

Mr Helou believed there was enormous potential in flavoured longlife milk.

"Sixty per cent of long life milk in China is sold online, so we should be able to supply online from Australia direct to consumers in China, gift-packed the way they want it," he said.

MG had announced plans to commit $300 million to $500m recreating its manufacturing footprint at its Cobram, Koroit, Vic and Edith Creek, Tas, factories - including a brand new dairy beverages line at Edith Creek - to specifically cater for the Asian market.

* Full report in Stock Journal, June 26, 2014 issue.

The story Asia key to dairy expansion first appeared on Farm Online.

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