SOUTH Australia's dairy industry marked a significant day this week as Lion handed over its cheese-making operations at Murray Bridge and Jervois to independent Victorian company United Dairy Power.
As part of the agreement with Lion, UDP will buy milk from the company for the remainder of the financial year, allowing Lion to fulfil its contractual obligations with suppliers.
Lion spokeswoman Julia Fraser said UDP effectively took control on Monday and the company was working through the background administrative procedural steps.
UDP will continue to make cheese, sour cream and Le Rice under contract for Lion, with some long-term contracts in place.
The handover included all employees at the factories being transferred to UDP. The company's signage will go up at both sites this week.
UDP general manager Darryl Cardona said the lead-up to the handover had been "all systems go".
He had flown from Melbourne to South Australia every week during January to prepare for it.
"Everything is working extremely smoothly with the handover of staff, our signs are starting to go up today (Tuesday) and everything is working well," he said.
"I couldn't be any happier."
The next step for UDP is to meet with potential suppliers - a lot of them expected to come from Lion as the company cuts its milk supply in SA back to 100 million litres as a result of the factory sales.
Mr Cardona was at an animal health day organised by Landmark at Meningie yesterday, giving a presentation to local farmers.
With most suppliers contracted until the end of June, he said the company was planning localised meetings for early March to meet and greet potential suppliers.
"We are fielding interest at the moment from farmers who supply every processor that collects milk in SA," he said.
"We have had field reps out during the week doing budgets for suppliers so they can make comparisons with our pricing and that of other companies, and have had extremely positive feedback."
UDP plans to increase throughput for the factories from 140mL to 300mL with a specific focus on cheese manufacturing, in particular the Caboolture brand.
"There are more than 80,000 tonnes of cheese imported into Australia every year at the moment," Mr Cardona said.
"SA cheese has the capacity and ability to replace the imported product.
"Caboolture mozzarella cheese has got terrific pizza capabilities and stretch, but some of the larger pizza chains import cheese from America. We want to replace that."
South Australian Dairyfarmers Association president David Basham said the handover would mean increased competition for milk in SA.
"It's a very significant day. We have a new owner who is looking to grow those factories and increase throughput, which is quite positive for dairyfarmers because UDP will require extra milk for those factories," he said.
But Mr Basham said not all those farmers who needed to change suppliers at the end of the financial year would be all that willing to do so.
"I think there will be some farmers quite pleased to be changing suppliers, some who are disappointed they will have to change and others who are more than disappointed and quite distressed," Mr Basham said.
*Full report in Stock Journal, February 2 issue, 2012.
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