Bega executive chairman, Barry Irvin, is urging consumers to think about the milk that they purchase and the impact of their purchasing decisions. Read more
Bannister Downs Dairy’s Farm Fresh Milk has been crowned the winner of the prestigious 2022 Australian Grand Dairy People’s Choice Awards. Read more
The Victorian state government is supporting local food producer, Purearth Foods, to make new products, boost sales in international markets and respond to supply chain risks. Read more
The Australian beverage manufacturer, Made, is disrupting the white milk category with the launch of ReMilk – 100 per cent fresh Australian milk, with the delicious taste and consistency of regular milk, but with half the sugar and more protein. Read more
A breakthrough in milk price transparency and buyer competition has been made, Australian Dairy Farmers (ADF) said, when the Australian Milk Price Initiative (AMPI) ran its first regional milk spot markets. Read more
Brownes Dairy, a West Australian brand, will change its cartons to Tetra Pak’s unbleached renewable milk cartons in its latest step to lead sustainability in the dairy industry. Read more
Harris Farm Markets officially opened its Clayfield store with – for the first time anywhere – milk from Queensland’s multi-award-winning Maleny Dairies on the Sunshine Coast hinterland on tap.
Soulfresh has released All Mighty Bruce Future M*lk which is a combination of wholegrain oats for creaminess, peas for protein and seaweed for calcium.
“Our team are always pushing boundaries and challenging the norm and All Mighty Bruce Future M*lk is the perfect example of this. We’re excited to bring the future of m*lk to the present and bring to life a m*lk that rivals all others on the market. Future M*lk ticks all the boxes – it’s creamy, it’s delicious, it’s environmentally friendly and nutritionally driven, you won’t ever look back,” said founder of Soulfresh Didi Lo.
Milk, the largest dairy category in China, is predicted to stand at US$26.9bn in 2020, US$1.6bn greater than the previously projected pre-COVID value. This translates to an increase on expected volumes from 9.6 billion kg to 10 billion kg in 2020 alone, primarily due to health concerns relating to COVID-19, according to GlobalData, a leading data and analytics company.
“China invested heavily in modernizing its dairy industry for the past several years and officially promotes milk consumption on the basis of its health benefits. Refrigeration has become increasingly ubiquitous in China, meaning that modern consumers have the space to store milk and other dairy products for longer,” Ryan Whittaker, consumer analyst at GlobalData said. “Milk is often positioned as a means to get more protein into their diet, and to help build and maintain the body’s immune system. Of course, COVID-19 pandemic has forced Chinese consumers to focus on their health, prompting a surge in demand.”
GlobalData forecasted annual milk sales in China, which were valued at US$24.2bn in 2019, to increase gradually to US$29bn in 2023. Following COVID-19-related disruptions, the projected figure is now closer to US$31bn, with the largest jump in sales occurring in 2020.
GlobalData’s most recent consumer survey found that 47 per cent of Chinese consumers consider themselves ‘extremely concerned’ about their health, whilst a further 52% said that they were ‘quite’ or ‘slightly concerned’ – in fact, only 2% of respondents said that they were ‘not concerned’ about their health at all.
When asked about white milk buying habits, a shocking 51% of respondents said that they were buying more than before, in addition to the 34% who said they were buying the same as before.
“The impact of COVID-19 on cooking at home should not be overlooked. During China’s lockdown, consumers were forced to remain at home and cook for themselves far more than before, and in doing so, ate out and on-the-go much less than before,” Whittaker said. “Milk offers a simple way to top-up nutrition at home with minimal effort while helping China’s dairy industry. Clearly, the milk category will do well during the pandemic, and attitudes towards health, supported by the government’s pro-dairy campaigns, are likely behind it.”
Fonterra Co-operative Group Limited today announced its annual results, final Farmgate Milk Price of $7.14 per kgMS and a dividend of 5 cents per share for the 2019/20 season, bringing the final cash payout for farmers to $7.19 per kgMS.
Fonterra CEO Miles Hurrell said 2019/20 was a good year for the Co-op, with profit up, debt down and a strong milk price.
“We increased our profit after tax by more than $1 billion, reduced our debt by more than $1 billion and this has put us in a position to start paying dividends again,” he said.
“I’m proud of how farmers and employees have come together to deliver these strong results in a challenging environment. They have had to juggle the extra demands and stress of COVID-19 and have gone above and beyond. I would like to thank them for their hard work and support.
“This time last year we were announcing our new strategy and customer-led operating model. We were clear that to build a sustainable future we needed to focus on three interconnected goals – Healthy People, a Healthy Environment and a Healthy Business.
“We went on to deliver a strong performance for the first half. However, what none of us could have ever predicted was what then played out – a world facing COVID-19. The flow-on effects of the pandemic did impact our performance in the second half, particularly in our Consumer and Foodservice businesses.
“2019/20 proved to be a year of two halves, but we delivered on all four of our priorities:
- We’ve supported regional New Zealand, contributing around $11 billion into New Zealand’s rural economies through the milk price, and we’ve rethought our approach to community support, with the aim of helping out more where it’s needed the most – such as, growing the KickStart Breakfast programme alongside Sanitarium and the New Zealand Ministry of Social Development and partnering with the New Zealand Food Network to help get dairy nutrition to those that need it the most.
- We’ve built a great team through a focus on our culture, and we’ve seen that in action in how we’ve responded to COVID-19.
- We’ve continued to reduce our environmental footprint, including hitting our 2020 target to reduce energy intensity across our New Zealand manufacturing sites by 20%, from a 2003 baseline – cumulatively, that’s enough energy saved to power all the households in New Zealand for 1.5 years.
- We’ve achieved our key financial targets with normalised earnings of 24 cents per share, a Total Group normalised gross profit of $3.2 billion, a $181 million reduction in capital expenditure and a $1.1 billion reduction in debt so the ratio of Debt to EBITDA has now improved to be 3.4 times our earnings, down from 4.4 times.
“The work we’ve done to strengthen our balance sheet has allowed us to focus on managing COVID-19. So far, demand for dairy has proved resilient and our diverse customer base and ability to change our product mix and move products between markets has meant we can continue to drive value.
“We’re at our best when we’re clear on what we need to do, why and how, and the whole Co-op is focused on it. When I look back on last year, it’s great to see how this clarity has helped us respond to challenges, adapt and deliver results.”
Total Group normalised EBIT was significantly up on last year from a loss of $17 million to earnings of $1.1 billion. This includes gains from asset sales, and impairments and costs relating to the strategic review.
Once these are taken out, the Total Group normalised EBIT, which the Co-operative uses to show its underlying business performance, was also up from $812 million to $879 million, despite the financial impact of COVID-19 in many of its markets.
Hurrell said the main drivers of the underlying business performance was a strong normalised gross profit in the Ingredients business and, although there was the disruption from COVID-19, the strong sales and gross margins from the Greater China Foodservice business in the first half of the year.
Ingredients’ normalised EBIT improved from $790 million last year to $827 million this year, with normalised gross profit up $165 million to $1.6 billion.
Hurrell said that at the Co-op’s interim results, the normalised gross profit in Ingredients was relatively steady.
“As we moved through the second half, we saw restaurants, cafes and bakeries close and intermittent spikes in supermarket sales, creating uncertainty across the global dairy market. This uncertainty resulted in softening milk prices, which helped improve the gross margin and gross profit in Ingredients.”
Greater China Foodservice’s normalised EBIT increased from $114 million last year to $169 million this year.
Hurrell said the business achieved strong year-on-year sales growth in the first half of the year but was then hit hard by COVID-19 when many food outlets were closed. Normalised gross profit started to quickly rebound in the third quarter – although he also points out it is still not at 100%.
“We have seen significant growth across the Anchor Food Professional product range in China. We have entered 50 new cities across China, taking our total to 350, and our products are now not only being used in Western style restaurants and bakeries but also those serving local cuisine.
“However, as per our guidance in our third quarter business update, our Foodservice businesses across Asia, Oceania and Latin America were impacted by COVID-19 in the fourth quarter. All three markets reported losses in the second half.
“Despite this, normalised EBIT for Foodservice overall was up 14% on last year to $209 million, which is a result of the strong performance by the Greater China business in the first half.
The Consumer business’ normalised EBIT reduced to $149 million from $227 million, mainly as a result of impairments of $57 million relating to the Chesdale brand and New Zealand Consumer business’ goodwill.
Normalised EBIT, excluding these impairments, of the Consumer businesses in Oceania and Asia improved, despite COVID-19. However, due to civil unrest and market disruptions in Hong Kong and Chile, the normalised EBIT, after excluding these impairments, of the Consumer business declined 10%.
Hurrell said its Australian Consumer business performed strongly with sales continuing to increase thanks to its popular beverage, spreads and cheese products.
“Our New Zealand Consumer business focused on improving customer service and keeping supermarket shelves well stocked, particularly as New Zealanders were stockpiling through COVID-19.
“Despite the better performance this year, due to the economic outlook post-COVID-19, our New Zealand Consumer business’s future cashflow projections are lower than we estimated last year and, as a result, we have decided to write down its goodwill by $21 million. It now has a total value in our accounts of $699 million.”
Mr Hurrell says, in addition to the improved earnings performance, Fonterra has followed through on its commitment to financial discipline and this has increased the financial strength of the Co-op.
“Our cash flow has improved and our debt has reduced by 19% or $1.1 billion compared to last year. Increased earnings, reduced capex, as well as the sale of DFE Pharma and foodspring® for cash proceeds of $623 million in the first half of the year, have all contributed to this improvement.”
Dividend and Farmgate Milk Price for 2019/20
Fonterra announced a dividend for the 2020 Financial Year of 5 cents per share and final Farmgate Milk Price for the 2019/20 season of $7.14 per kgMS.
Fonterra Chairman John Monaghan says for a 100% share backed farm, this gave them a final cash payout of $7.19 per kgMS.
“This year marks a return to paying dividends, a position we expect to maintain in the future, assuming normal operating conditions.
“At 5 cents per share, the dividend is at the lower end of the 5-7 cent range calculated under the Board’s dividend policy guidelines.
“In the context of so much uncertainty, as COVID-19 continues to impact our key markets and customer confidence, distributing a 5-cent dividend is a prudent decision and one that balances our aims of further reducing debt and distributing earnings.”
Fonterra has announced a 2020/21 earnings guidance range of 20-35 cents per share and has also reaffirmed its 2020/21 forecast Farmgate Milk Price range of $5.90-$6.90 per kgMS.
Monaghan said the impact of COVID-19 is still playing out globally.
“From a Milk Price perspective, the supply and demand picture remains finely balanced and for that reason, we are maintaining our previous forecast range for this season.
“In terms of our earnings, we are forecasting a full-year normalised earnings per share range of 20-35 cents per share.
“There continues to be significant uncertainties – including how the global recession and new waves of COVID-19 will impact demand globally, and what will happen to the price relativities between the products that determine our Milk Price and the rest of our product range.
“As a result of these uncertainties and given that financial year has just begun, we are giving a forecast earnings range wider than we usually would.
“We will be monitoring the situation throughout the season and as the year progresses, we would expect the earnings range to narrow.
“The best way of coping with uncertainty is to stay on strategy and focus on what is within our control – delivering for our farmers, unitholders and customers, and maintaining our financial discipline.
“We need to stay agile and draw on our strengths across the supply chain to manage and adapt to the changing global situation.”
Lion Dairy and Drinks has announced its minimum pricing for its direct milk suppliers across key Australian dairying regions for the 2020/2021 milk season. This pricing is applicable from 1 July 2020 to 31 August 2021.
In line with the requirements of the new mandatory Dairy Code, which came into play on 1 January 2020, Lion Dairy & Drinks has released all of its contracts for each dairy region on its website and is offering both exclusive and non-exclusive supply agreements for the 2020/2021 milk season.
Murray Jeffrey, agricultural procurement director for Lion Dairy & Drinks, said the publication of regional-specific contracts and pricing on Lion Dairy & Drinks website was designed to provide transparency to farmers.
He said the company was mindful of the impact COVID-19 had on southern milk pricing, together with the impact that drought has had on many farms in New South Wales, South East Queensland and Northern Victoria over the past 18-months and was sympathetic to the impact this was having on higher feed costs and farm profitability.
Murray said Lion Dairy & Drinks was committed to working with all its dairy suppliers on mutually beneficial partnerships and programs – this included continuing to facilitate its unique sustainability program, Lion Dairy Pride. The program launched in 2017 and is designed to help our dairy suppliers be more sustainable across five key areas of the dairy farm business system: milk quality, animal welfare, people, community and wellbeing, the environment and business management. The program offers easy access to useful tools and templates, as well as links to external resources.
“Our minimum pricing for the FY2020/2021 milk season is a sign of our confidence in the Australian dairy industry, and in our growth strategy,” Murray said. “Our purpose-led vision is to deliver sustainable, enjoyable nutrition to help people live well and our strategy will see us continue to focus on driving profitability in key dairy categories with our premium dairy brands and market-leading innovation.”
Murray said the company had proven to be the natural partner for dairy farmers who wanted to focus on growing value through nutritious, branded dairy products that delivered competitive returns and a sustainable future for the industry.
“We are focused on driving profitable growth in milk based beverages, white milk and yoghurt as well as for the benefit of our farmer partners, customers, network partners, consumers and other stakeholders,” he said.
“Our approach to milk procurement for many years has been based on offering farmers, what we call the ‘3 P’s’: competitive pricing and contract terms, partnerships and a clear purpose and strategy built around growing profitable demand for dairy and ensuring sustainable returns through the supply chain.
“We are working hard to deliver compelling pricing underpinned by our focus on driving sustainable value back into the industry. Lion Dairy & Drinks is committed to working with all its dairy suppliers on mutually beneficial partnerships and programs.”
There are around 280 dairy farms supplying the Lion Dairy & Drinks business across Australia – this includes direct Lion Dairy & Drinks suppliers and suppliers through the Dairy Farmers Milk Co-Operative (DFMC
Coronavirus and subsequent government restrictions have hit businesses hard, but milk processor is one of the Australian company to rise to the challenge.
As the dairy partner to over 5,000 cafes in VIC, NSW and ACT, Riverina Fresh was forced to seek out alternate sales channels fast when stage three government restrictions forced the shutdown of thousands of hospitality businesses overnight.
Discussions with supermarkets began, and within 72 hours, Riverina Fresh had expanded its retail footprint with a selection of its milks on the shelves of 180 Woolworths stores in Victoria and 100 per cent of stores in NSW and ACT, bypassing the backlogged distribution centres in Victoria and delivering direct to store with its refrigerated trucks.
“Panic buying had set in, and so we seized the opportunity to partner with Woolworths, and regional Coles and independent retailers to keep quality Australian produce on their shelves,” said Riverina Fresh CEO Rob Collier. “We’re a 100 per cent Australian owned dairy company that understands how to navigate tough times, having supported our farmers through the drought in the Riverina for the past three years.”
Following the expansion of its retail footprint, Riverina Fresh sought to collaborate with its out of home channel customers, using Riverina Fresh refrigerators for its milk and cream to enable cafes in their own pivot from eatery to local food pantry.
“Having been part of the foodservice and specialty coffee industry for almost a decade, this challenge is like nothing else we have faced before. And while the storm is far from over, it has been uplifting to see how the industry has come together to rally for their staff, their producers and their partners,” said Collier.
Riverina Fresh’s own pivot has secured the brand an expanded retail footprint in all NSW and ACT Woolworths; a boost for Riverina Fresh, its employees and farmers, in an uncertain time for many Australian manufacturers. The brand is now actively exploring the establishment of a home delivery channel in Melbourne and Sydney as well as further partnerships with independent retailers.
On the sidelines of the 2020 Australian Dairy Conference , Milk2Market Head of Corporate Development Richard Lange said the company’s new Milk Exchange had received a large volume of registration applications and enquiries from both farmers and processors.
“The current milk shortage is clearly a key driver of the strong response to the opening of the Milk Exchange.”
Lange said strong farmer interest in the Milk Exchange was also a sign of farmers’ growing confidence that higher profitability can be achieved through commercial as well as technical innovation.
The Milk Exchange offers farmers a traded transparent price, and the choice of managing their individual risk and accessing higher value for their milk.
“Selling some or all of their milk on the Milk Exchange allows farmers to manage their risk according to their individual circumstances and to back in their operational productivity improvements by accessing better returns.”
“The way the dairy industry has operated to date – where farmers commit a whole year’s production at an ‘annual price’ – has managed risk in a blunt way that left value on the table.”
Lange said the Market Exchange for the first time gives the dairy sector a functioning market that allows farmers to capture greater value in times of high competition for milk.
“Farmers can’t access full value and returns that match the risk they take unless they get fair and transparent pricing and the opportunity to sell to whichever buyer values their milk the most.”
“The current spot price is over 60 cents per litre and the average contract price is under 50 cents. The Milk Exchange gives farmers a way to access some of that upside.”
The commencement of the Milk Exchange means that Australian dairy farmers will go from only having access to local buyers, to having access to buyers all over the country.
“The Milk Exchange is a natural evolution for the Australian dairy sector, bringing it into line with other agriculture sectors. In a real market, sellers help set the price. They don’t just take it.”
Lange said that processors were embracing the Milk Exchange because it will benefit them as well as farmers, directly as a supply channel and by helping to create a more efficient market in which farmers can profitably produce more milk.
“Lifting profitability across the dairy industry requires that processors get more milk volume. This requires that farmers can capture greater value from their hard work.”
The Australian Competition & Consumer Commission (ACCC) has given the nod to China Mengniu Dairy Company Ltd (Mengniu) for the proposed acquisition of Lion Dairy & Drinks Pty Ltd (Lion D&D).
“Mengniu Dairy was already looking for opportunities to diversify its business and expand its brand presence in the emerging markets. The transaction will allow Mengniu to enhance its presence in the Australian market and strengthen its portfolio by leveraging Lion’s longstanding brand presence and manufacturing and cold chain distribution hold across Australia. The transaction will strengthen Mengniu with a stronger foundation to excel in the Asia-Pacific (APAC) region,” said Shagun Sachdeva, consumer insights analyst at GlobalData, a data and analytics company.
Mengniu has recently completed the $2.2bn takeover of infant formula company Bellamy’s Australia, in line with its aggressive acquisition strategy. The series of acquisitions will create greater synergies for the group not only from the geographical footprint point of view but also from the supply chain perspective as well.
At the same time, Lion has been trying to sell its dairy portfolio since 2018, which comprises of Big M, Pura, Dairy Farmers, Berri and Daily Juice brands. In October last year, Lion sold its specialty cheese business to Saputo Dairy Australia, with plans to focus on high-margin alcoholic beverage and premium non-alcoholic drinks in Australia and New Zealand.
“According to Global Data, the APAC dairy and soy food sector is forecast to grow from $194bn in 2018 to $254bn in 2023, registering a compound annual growth rate (CAGR) of 5.5 per cent,” said Sachdeva. “Milk was the largest category in the APAC dairy and soy food sector, followed by drinkable yogurt and cheese. The Australian dairy and soy food sector is expected to reach from $12.1bn in 2018 $14.8bn in 2023.
“The news of getting a green signal from ACCC comes at an extremely delicate time when China is going through tough times because of coronavirus and hence, it will be interesting to see how the deal will pan out in the future.”
The fundamentals underpinning the global market outlook remain positive but may weaken with improving expansion in milk supply and a slowing in trade in milk powders. However, the outlook for commodity product values is mixed as butterfat values have stabilised, while increased cheese capacity in Europe will keep supplies abundant and may cap values.
Skim milk powder
SMP fundamentals recently improved with lower EU and US output and sustained export demand. Going forward, this is new territory with SMP fundamentals no longer driven mostly by the EU stock turn. Prices should remain relatively firm, despite improving fresh product availability from Europe and the US. SMP demand in Asian markets has slowed but is likely to revert to trend.
Whole milk powder
China and Hong Kong helped the overall numbers look better and added the most trade in the month – up 69.4 per cent YOY or 14,000t. YOY shipments to this key market have now increased in 11 of the last 12 months for which data is available. Demand for milk powders remained resilient with the changes in China’s internal milk use.
The disparity in cheese prices should correct. EU commodity cheese values may be influenced by SMP/butter stream returns, but more milk will be diverted to increased plant capacity, which will keep a lid on values. EU exports again rose more than 8,000t YOY in September – the growth in the latest month was driven by stronger shipments to the US and South Korea.
Butterfat prices have remained steady with improved domestic EU seasonal demand. The EU balance sheet should improve but demand and supply growth will be closely aligned. Overall demand in developing markets remains price sensitive and may continue to pressure NZ prices. NZ exports of fats continued to shrink, but at a much slower rate – both AMF and butter were down YOY in September, 2 per cent and 7 per cent respectively. Meanwhile, the EU expanded butter exports in September by 74 per cent, despite shipping butter at prices still higher than NZ.
US exports continued to shrink, down 13 per cent in September, while the EU grew shipments by 3.2 per cent. Meanwhile, NZ trade rose 14 per cent YOY in September – this followed consecutive monthly falls and was driven by stronger sales into the North American market. US product remains competitive as prices have weakened since September while EU and Oceania prices remained steady.
Dustin Boughton, procurement, Maxum Foods
Today, on World Food Day, OzHarvest will show Aussies that tackling climate change, starts with your plate! The social media campaign #countmein aims to inspire individual action and show thatmaking small changes to your own food waste is one of the few personal habits that can actually help restore the planet.
Food waste is often over looked in the climate change debate, but is in fact a major contributor responsible for 8% of global greenhouse gases (more than the aviation sector!) as food left to rot in landfill produces methane—a greenhouse gas that is 28 times more potent than carbon dioxide.
Figures recently released from the Federal Government’s National Business Report reveal Australia is wasting over 7 million tonnes of food each year, which equates to 298kg of food per person,making Australia the world’s fourth highest food waster per capita.
READ MORE: OzHarvest app designed to help fight hunger
OzHarvest Founder and CEO, Ronni Kahn AO says people are experiencing ‘eco-anxiety’ as most feel helpless in the battle to protect the planet, but reducing food waste is where we can all make a difference every day.
“The amount of food we waste is hard to visualise as once it goes in the bin it’s out of sight and out of mind, which leads us to think we don’t actually waste that much. 298 kg per person is a staggering amount – the same weight as six adult kangaroos. Urgent action is needed if we are to achieve the national target to halve food waste by 2030.”
“Cutting back on our individual food waste is the single most powerful way we can take direct action against climate change. It’s an easy win, both for your pocket and the planet. So from today, we’ll be asking people to #countmein and share what small changes they will make to reduce their food waste,” said Ronni.
Reducing food waste is ranked as the third most effective solution to reducing global warming by scientists at Project Drawdown. Taking action today could prevent 70 billion tonnes of greenhouse gases from entering the atmosphere in the next 30 years and is one of the most effective ways for individuals to protect our partnership with the planet.
To see what small changes you can make, complete the quiz and share the campaign go to www.fightfoodwaste.org
More Australians than ever before are choosing plant milk over dairy, but there’s one in particular that’s fast becoming the new favourite for coffee – oat milk. With this in mind, Toby’s Estate has teamed up with Califia Farms to offer oat milk to its café customers nationwide.
“With compelling health, ethical and environmental benefits it’s no wonder more people are turning to plant-based diets. When it comes to coffee, they’re now looking for more options than just soy and almond and so we knew we had to listen to our customers,” said Jody Leslie, Toby’s Estate general manager.
After a launch in the US, Califia Farms recently launched its new Oat Barista Blend in Australia and now Toby’s Estate is the first specialty coffee roaster who will soon be distributing it to its café network across Australia, starting with NSW.
“We found the perfect product in Califia Farms Oat Barista Blend because it’s so creamy and delicious, yet importantly doesn’t overtake the flavour of our coffee. It’s ideal for baristas too because it’s easy to stretch, has a smooth pour and it doesn’t split. It is very close to how full fat milk performs,” added Leslie.
According to Dan Kaplan, national business manager for Califia Farms Australia, in the US oat milk is the number two dairy alternative in coffee shops after almond milk and it looks like Australia is headed in the same direction.
“Oat milk is not only dairy free and not a nut milk, but it’s free from soy and made from a sustainable grain, which makes it a very appealing option for consumers,” said Kaplan.
Califia’s Oat Barista Blend is made from whole rolled oats and is unsweetened with no added sugar, gums, dairy or soy. It also has half the amount of natural sugar than other oat milk brands.
A2 milk had a rocky start when New Zealand businessman Howard Paterson and research scientist Dr Corran McLachlan founded the A2 Corporation in 2000. The milk, which claims to help reduce the risks of digestive problems, diabetes and heart disease because it is said to contain only A2 beta-casein, seemed to hit a nerve with people who were sceptical of its health benefits. Three years after the founding of the company, both men died, which left the company in a state of flux. It went through several highs and lows – including going into administration in late 2003 – before becoming The a2 Milk Company, which now is based in Australia. It is run by Jayne Hrdlicka, who started at the company just over 12 months ago.
Hrdlicka was the CEO of Qantas subsidiary Jetstar before joining the milk company, and has held positions at Ernst and Young, Bain & Co, and was a director of Woolworths between 2010-2016. At the Global Food Forum held in Sydney, Hrdlicka spoke about where A2 milk is headed, why it is seen as a premium brand in China, and the science behind the milk’s claims.
It’s a risky strategy to base your whole business model on one product – more so when some are a little uncertain of what makes it different from similar products. It’s share price has fluctuated over the past 12 months, but it does help when news gets out that discerning Chinese consumers think the milk is a premium brand. It has entered two of the most lucrative markets in the world – the US being the other – and Hrdlicka sees nothing but growth in the company’s near future.
“We’re not talking specific numbers, but we’re playing in the two biggest consumer markets in the world,” she said. “We’re building a deep franchise with those consumers and we’re really excited about what the possibilities bring to the brand and shareholders.”
When it comes to the science behind A2 milk, Hrdlicka makes no apologies about its brand strategy and indicates that it is the disruption that A2 milk is bringing to the marketplace that is causing the issue. Most of the noise about the benefits, or lack thereof, of the milk, is coming from those who have a vested interest in the milk not being commercially successful. The irony being that this is also keeping the brand in the spotlight, which is not a bad thing if you are Hrdlicka.
“We are quite comfortable with the company getting beaten up by big legacy players who feel uncomfortable because we are doing something different,” she said. “It happened in Australia, it happened in New Zealand. We expect it to happen everywhere we go and that is what happens when a disruptive approach to a category that has been around for a long time unfolds.
“It happened in aviation, and it is happening across all consumer products, not just milk. We expect that it is part of the process. The crazy part of it is that it draws consumer attention to the choices, including ours. It causes consumers to do their research and we’re the beneficiary. It is part of the process of evolving the category.”
Hrdlicka said the company worked hard in the early stages to ensure there was enough science for consumers to educate themselves. She said there are a number of studies that have been completed by independent research markets that came to similar conclusions that the founders of the company did.
“What is fantastic for us at the end of the day, is the impact it has on the consumers,” she said. “And consumers are telling us they are enjoying a functional benefit and they can enjoy fresh white milk again where they weren’t able to in the past. Or, they were fearful of the impacts of dairy products, and this has given them new confidence to re-enter the new category.”
What is helping the brand, and something not lost on investors, is its foray into the Chinese market. With milk powder a hot commodity, it seems the affluent middle class in the Middle Kingdom can’t get enough. Hrdlicka knows how important the market is, so much so that she spent her first week working for the a2 Milk Company in Sydney, then the second week in China. She goes up there every six weeks or so, not just to be seen, but also to meet with their partners, listening and learning on the ground and making sure the company’s strategy in the area is sound.
“We are doing some really exciting things in China,” she said. “We spent the first half of the financial year really understanding consumers, talking to mothers, talking to parents, talking to grandparents – really trying to understand the decisions they are making and how they we making them – where they like to shop. That gave us a lot of clarity on how to constructively build the brand and how to leverage our multi-channel strategy.”
And what about the US? Retail giant Costco started selling the milk in parts of the US at the end of the 2018, but Hrdlicka isn’t getting carried away just yet.
“We were deeply appreciative of Costco’s support in the US,” she said. “The success story for a2 milk in the US is in its early stages, but the signs are impressive. A2 milk is sold in 12,400 outlets across the country today and Costco is part of that story. It is taking the product to consumers who are interested in different pack sizes and are value driven, but they are a big and important format in the eyes of consumers and play a meaningful role in the repertoire. They are important players in the natural channel and they have helped us build our brand.”
Finally, there is the online presence of A2 milk. Hrdlicka knows that part of the company’s future success lies in the less tangible online marketplace.
“Alibaba is a really important trading partner of ours as is Amazon via its Whole Foods portal,” she said. “I will say, as a matter of course, that we are multi-channel company – ecommerce is a really critical channel for us as a business today and will be going forward. And if you listen to your consumers, it plays a really powerful role for them in their day-to-day lives. You don’t quite have the same choices in leveraging direct deliveries in Australia that you do in China and the US, but it is a changing canvas and digital players are changing the world for consumers at a very fast pace.”
Swinburne will lead a research project valued at over $2 million to develop new technology that will get milk from farm to fridge more quickly, enhancing the productivity and competitiveness of Australia’s $13.7 billion dairy industry.
The ‘Live Inbound Milk Supply Chain Monitoring and Logistics for Productivity and Competitiveness’ project (Milk Supply Chain Project) has just received $600,000 under round 7 of the federal government’s Cooperative Research Centres Projects (CRC-P).
CRC-Ps are designed to improve the effectiveness of Australian research by bringing researchers and industry together to solve real-world problems and deliver tangible outcomes.
Swinburne’s two-and-a-half-year project will develop an Internet of Things (IOT)-based system that links dairy farms, milk carriers and a milk processor, and allows live monitoring of milk supply chains. The data collected will enable highly accurate milk supply forecasting.
Swinburne’s Milk Supply Chain Project will be conducted in collaboration with Bega Cheese, Telstra and three Australian milk suppliers.
Director of Swinburne’s Internet of Things (IoT) and project researcher, Professor Dimitrios Georgakopoulos, says the project will improve operational efficiencies and create opportunities to generate revenue.
“We will be using cutting-edge technology, including over 700 sensors, to measure specific aspects of the supply chain. We will also use Telstra’s newly-deployed Narrowband Internet of Things (NB-IoT) network, which is Australia’s largest IoT network and one of the largest in the world,” Professor Georgakopoulos says.
“The data collected by the IoT sensors will find trends to make production schedules more efficient and enable highly accurate milk supply forecasting. These collectively enhance the chain’s productivity and competitiveness,” Professor Georgakopoulos says.
Swinburne continues to celebrate industry research success
This Milk Supply Chain Project is the fourth Swinburne project to receive funding under the CRC-P grant scheme since it was introduced in 2016.
Separate rounds have allocated funding to:
- develop a new and unique biodegradable and renewable bio-based oil
- introduce an Australian graphene characterisation and certification capability, and
- investigate high-performance energy storage alternatives to lithium-ion batteries.
This project is part ogF Swinburne’s Industry 4.0 Initiative, which helps global industry solve challenges and create opportunities from the profound changes wrought by the industrial revolution.
Swinburne is the only university in Australia with a holistic Industry 4.0 strategy and recently won the Australian Business Award for business innovation.