SWEDISH packaging company Tetra Pak says Australian dairy processors need to build new factories, rather than update their existing ones, to avoid missing out on milking Asia’s burgeoning middle class.
Craig Salkeld, Tetra Pak’s managing director for Oceania, said Australia was one of the few countries which produced far more milk than it consumed and therefore was well positioned to feed an increasing appetite for dairy products in Asia.
But Mr Salkeld said the cashing in on that opportunity was far from a fait accompli. He said other countries were eager for a slice of the so-called Asian dining boom.
In 2010 the US overtook Australia, knocking it to fourth place among the world’s biggest dairy exporters.
«You can no longer think of just adding an extra part of your factory,» Mr Salkeld said about Australian milk processors.
«You have got to start thinking about investing in completely new factories that have the best cost production and the best technology if you are going to be able to compete on these sorts of opportunities.»
Mr Salked’s comments could be viewed as a conflict of interest. Tetra Pak is not just a packaging company, it also designs and builds milk processing plants.
But it is not just Tetra Pak which says dairy companies need to invest more. Australia’s biggest milk processor, Murray Goulburn, has ambitious growth plans. For the first time in its 63-year history, it hopes to secure funding from outside its farmer shareholder base.
The co-operative plans to spend $500 million on factory upgrades to export more customised products to Asia. It has built two new fresh milk factories in Melbourne and Sydney to service the domestic market.
«It’s about automation, it’s about cost leadership, doing it better than anyone else, and it’s not hard to do,» Murray Goulburn chief executive Gary Helou said earlier this year.
In the late 1990s Australia produced the same amount of milk as the world’s biggest dairy exporter, New Zealand. Since then the two countries have gone down vastly different paths. Australia’s milk production has fallen about 20pc, while New Zealand’s has risen by 88.9pc to almost 19 billion litres last year.
With little natural resources, the New Zealand government has been a big supporter of agriculture. In 2001, a national dairy ‘champion’, Fonterra, was formed through the merger of two of the country’s biggest dairy co-operatives.
Seven years later the New Zealand government signed a free trade agreement with China. Australia, meanwhile, has been negotiating such an agreement for nine years. Its biggest milk driers are a tenth of the size of New Zealand’s, which can produce about 30 tonnes of powder an hour.
Still, Mr Salkeld said the future was «extremely bright» for Australian milk processors.
«There have been some very difficult times in the dairy industry. But now they sit upon a very good quality product,» he said.
«But it takes a lot of investment, technology and innovation to actually fulfil that opportunity, and that’s something that whole industry is really coming to grips with now.»
Source: The Land