Higher-value organic segments targeted by Australian Dairy Farms Group to offset conventional market price declines

By Lester Wan contact

- Last updated on GMT

The new developments will include a UHT milk facility, and a new best-practice wet-blend milk powder drying plant for organic infant formula.
The new developments will include a UHT milk facility, and a new best-practice wet-blend milk powder drying plant for organic infant formula.
Australian Dairy Farms Group recently announced it would be converting all its dairy farms to organic production, as it seeks to expand from the conventional milk market to higher-value segments.

The directors of the Group voiced their confidence in the strategy to reposition the company “from being a minor participant in the highly-competitive conventional milk market” ​to a supplier of “Australian grown and processed organic milk” ​and organic infant formula made from it.

“This is a high value-added market with major barriers to entry and sparse competition,”​ explained Peter Skene, director and CEO.

The new developments will include a UHT (long life) milk facility for domestic and export markets, and a new best practice wet-blend milk powder drying plant for organic infant formula made from organic milk.

“The initiatives are a first significant step in making the company a major player in producing and distributing organic premium-quality branded food products,” ​added Skene.

Largest organic dairy farmer

Australian Dairy Farms’ core assets are six dairy farms in the state of Victoria comprising 3,600 acres upon which are reared 3,500 free-range milking cattle — producing 17m litres of milk annually.

The group also owns an acquired milk processing facility, the Camperdown Dairy Company (CDC).

CDC has the capability to produce “specialist milks” such as organic, Jersey and free-range milk. Currently, it mainly produces bottled milks, butter, cream and yoghurt under own brand labels, and is a contract packer for other suppliers.

The group has now completed its applications for conversion to organic milk production on all its dairy farms. Based on today’s market, this will make it the largest single-owned entity organic dairy farming operation in Australia.

Five-year growth plan

The company stated that it has a five-year plan, which includes new specialised production facilities on its properties, to refocus its production to organic milk and infant formula and to establish itself as an organic brand owner.

In a recent market announcement, the company quoted the Australian Competition and Consumer Commission (ACCC) in its interim report into the dairy industry last November, saying: “Wholesale and retail non-organic milk prices have been declining in real terms since the industry was deregulated in 2000.

“Since 2001, the retail price of private label milk has declined in real terms by a further 12% on earlier reductions.”

According to a survey of Australian shoppers by Acosta, organic dairy products are the most frequently purchased organic food in Australia. There has also been a significant increase in the percentage of all shoppers purchasing organic dairy products — from 34% in 2012 to 47% in 2016.

Additionally, according to data from market research firm Euromonitor International, the organic dairy market in Australia is growing at a rate of 16% per year.

In terms of organic infant formula, Australia and New Zealand sales are expected to grow from US$169m in 2017 to US$400m by 2023.

 

Related topics: Manufacturers, Pricing Pressures

Related news