Murray Goulburn chief executive Gary Helou has predicted a major shake-out of dairy processors in Australia and warned the industry and his company needed to look outwards for growth.
Mr Helou said the number of significant processors in Australia would halve from eight — including Lion, Fonterra, Saputo, Parmalat and Danone and Bega — within three years as major players developed sufficient scale to project into the region.
“I cannot see that there is a big enough profit pool there for all of us,’’ Mr Helou told the Global Food Forum.
Australian dairy production has shrunk from around 12 billion litres a year to nine billion.
But Mr Helou said he saw no reason why production could not get back up to 15 billion litres.
Murray Goulburn was planning to invest nearly $500 million over the next three years to increase production of milk powders, cheese and “better for you’’ dairy drinks.
The comments came as the world’s biggest dairy company Fonterra, reports a slump in profit as it was unable to sell enough high-value milk powder and had to switch production into cheese which was not sold at a profit.
Mr Helou said the powder market had not peaked, but companies needed to move quickly to take advantage of demand from China where instant formula remains a growing market.
Mr Helou said the Australian industry was too focused on the domestic market and two players — Coles and Woolworths — and needed a “quantum change’’ in thinking to focus on opportunities in the region.
Fonterra Australia chief executive Judith Swales said NZ had stolen a march on Australia in dairy by giving farmers the confidence to invest and take on debt to expand production and project the company into the region.
She said the company also employed 300 scientists and spent $100m a year on research and development to improve products and processes in the industry.
Source: The Australian