Lion Foods says it is satisfying a demand for less processed food by altering its milk manufacturing process to remove permeate, a watery milk production by-product, from products launched this week.
The Dairy Farmers and PURA brands now both offer 'permeate-free milk' options, where they are owned by Lion Foods, with observers suggesting the move could also be a marketing ploy to rebuild liquid milk margins shattered by a supermarket price war and heavy private label discounting.
The firm revealed a AUS $1.2bn (€980,000) write down - mostly in the value of its Dairy & Drinks division - in its 2011 full-year results announcement in February, citing "nine months of sustained deep discounting activity in white milk" as well as poor weather and natural disasters in key markets.
Milk margin woe
The discounting had led to a "transfer of sales volumes from higher margin branded products into private label, and from the non-grocery channel to grocery", Lion Foods said, reporting on the 12 months to September 30 2011.
But external relations director, Libby Hay, said in regard to permeate-free milk: “We have listened to our consumers. Three out of four told us they’re becoming more concerned about how processed their food is."
Hay's comment is based upon the results of an online survey conducted by market research company TNS between April 27 and April 29, among 1,346 Australians aged 16-64.
As a watery byproduct of milk processing, permeate (which comprises 65-85% lactose) is added to milk by some dairy companies to dilute the protein levels - which fluctuate according to the seasons - or to cut fat. But adding permeate also represents a cost saving for processors.
But Lion said that omitting permeate simplified the milk manufacturing process and delivered milk that was closer to how was is on the farm.
TNS research results also showed that nine out of ten Australians who check for additives and preservatives and the product processing levels would choose a less-processed option if given a choice, Lion Foods said.
'Purest quality milk'
PURA is marketing its 'permeate free' milk - designated by a label and available in Western Australia and South Australia, Victoria, Northern Territory and Tasmania from July 1 2012; Dairy Farmers' product will be available in New South Wales and Queensland from the same date.
Hay said: “We looked at our manufacturing process and realised that adding permeate was not essential, so it was an easy decision to remove it from our milk.
"By not using permeate, the natural seasonal variations in protein will flow through into our rich, creamy milk, providing a product that is the purest quality milk," she added.