THE Australian dairy industry is losing out to New Zealand in the massive, growing Chinese market, according to the managing director of Australia’s largest dairy company Murray Goulburn Co-operative, Gary Helou.
Mr Helou said Australia’s failure to negotiate a Free Trade Agreement with China meant it paid tariffs of 10 to 15 per cent on dairy exports, compared to NZ that now paid 6-8pc and in five years would pay none.
“We can’t compete behind that brick wall,” Mr Helou told the Gardiner Foundation Australian Dairy Leaders Luncheon in Melbourne on Monday.
“We need to fix that and we need to fix it pretty quickly.”
In a wide-ranging address, Mr Helou also identified supermarkets and the rise of private label brands and the number of processors in Australia as problems for the industry.
He said he was committed to cut more than $100 million in costs from the company to make it a cost leader so that it could return higher prices to its farmer suppliers.
“I am absolutely determined to squeeze those internal parameters for benefit of maximising value and maximising milk prices for our shareholders,” he said.
And he outlined a vision for the dairy giant that would see it as the “first choice dairy food company” in a range of markets, including branded retail and value-added products.
Murray Goulburn was “very good at busting up milk into ingredients” but it also needed to develop an outward focus.
“I think there is something else out there, particularly as we see consumer demand for our products go through the roof,” he said.
“So a market branded and differentiated international business to capture value and value-add, I think that’s going to be our plus.”
He also planned to revitalise the company to expand dairy into every food application – breakfast, lunch, dinner, liquid foods, beverages, ingredients and pharmaceuticals.
And that opportunity would not just be in Australia but in export markets, particularly into Asia, where there was huge potential.
But because the company sold about half its product in Australia, it could be selective in export markets and pursue those opportunities that offered the best returns.
Mr Helou said with the dairy industry being a big player in the domestic market, “you had to talk about the elephant in the room and that is the continued rise and rise of private (supermarket) brands”.
“It is a big factor that is impacting our lives,” he said.
“It is a contest out there: it is a contest of ideas, it is a contest of economics, it is a contest of strategies.
“If I’m playing the supermarket retail game, then I’ve got to beat them, because they have a declared objective to grow their share at my expense.
“As a player, I need to deal with this; it’s is a serious issue that we face.”
Mr Helou said the Australian dairy industry needed a “sustainable structure”.
“You’ve got to be careful about how you say these things, but I think it is quite a crowded house,” he said.
“You’ve got a lot of players … the international marketers, Fonterra, Kraft, Lion, Parmalat; domestically and farmer-owned or farmer originating companies like Murray Goulburn, Bega, Warrnambool, small up-streamers and small down-streamers, all coming down to the Australian market domestically, be it retail or non-retail and with export still part of it.
“A salutary look at this would conclude there are a lot of players in this industry; there’s probably a good reason, I’m just reflecting on what I see.”
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