Devondale Murray-Goulburn is not trying to re-invent the cheese wheel to win back consumer support and grow its business, instead it is banking on re-packaging.
The Australian dairy giant saw huge potential in domestic and export packaged cheese markets,
Almost 99 per cent of Australian households had cheese in their fridge and last year’s $1.1 billion in national supermarket sales was 2.8 per cent up on the previous year.
But Australia’s per capita consumption was “nowhere near where it is in Europe”.
“Not only do we have a growing domestic position in cheese we’ve got a growing export position as well, primarily around food service. That’s cheese for hamburgers and cheese for pizzas,” interim chief executive David Mallinson said on Monday while inspecting M-G’s new $90 million northern Victoria cheese packaging factory at Cobram.
“Our new shred line will be able to quick freeze mozzarella which means it can be shipped anywhere in the world in a frozen state to be used straight on pizzas, which is a huge advantage.
“There’s not other IQF plant in Australia. That puts us in a position where we can drive that export positioning.”
Chris Diaz, M-G’s executive general manager operations and supply chain, said the Cobram facility was the best of its kind in the Asia Pacific region.
The automated process cuts 20kg cheese blocks into consumer-sized blocks, slices and shredded packages.
There was no human involvement on the line from start to end, reducing the risk of contamination.
“We decided to put the facility close to our bulk facility because there’s synergies to supply chain and product movement and storage etc,” Mr Diaz said.
“We keep all our cheese expertise within the area and region.”
He said the factory could process 60,000 metric tonnes a year and there was room for growth.
“It has been built to allow us to expand future capacity,” he said.
“We have room to put in extra lines that actually link into services we’ve got and existing lines as well so we maximize the footprint we’ve got.
“But it also allows us to get to market at speed if there’s an opportunity.”
Domestically, M-G will next year launch redesigned resealable packaging for sliced and shredded cheese to give better brand exposure on supermarket shelves.
The company will also launch an Australian-first resealable package for its cheese blocks from April, 2017.
“The real innovation globally in cheese is not in the cheese itself. No-one has changed the way we make cheese in 300 or 400 years,” Mr Mallinson said.
“The hardest thing with cheese, as everyone knows, you open the cheese and it ends up going moldy because it sits in the fridge somewhere.
“Reseal-ability of packaging and closures that protect the cheese are the issue.”
The new Cobram production line would come online in February, under-pinned largely by M-G’s private label cheese contract with Coles, which would initially take about 20,000 tonnes a year.
Mr Mallinson was confident M-G would meet its contract demands after a disastrous 2016 saw many suppliers turn their back on M-G after it slashed farmgate milk prices and imposed an unpopular over-payment recovery program on farmers.
There was a 20 per cent drop in milk production across northern Victoria in October but Mr Mallinson said about half of that was seasonal – due largely to a wet July, August and September – and would recover.
He said the company had the capacity to transport milk to Cobram from other regions if required.
“You must keep in mind Murray-Goulburn still has 2.8 billion litres of milk, that’s a hell of a lot of milk,” he said.
He said rebuilding brand reputation was a harder task but the business was sticking to its course.
“I think Murray-Goulburn has a lot of ground to cover to get its credibility back with farmers and we’ve been quite open about that, and a long way to go to get it right,” he said.
“I know it has been a very rough year for Murray-Goulburn, with the step-down and our CEO and CFA departing and none of us is making excuses for that.
“But the strategy really doesn’t change.
“The first part is around operational excellence and to compete globally you must have lowest cost base … and how we handle that operational excellence is through innovation.
“If we want to be a commodity seller we take a commodity milk price.
“Moving our products up the value chain, whether it’s in consumer packs, value adding ingredients like nutritionals is really getting a better return than a commodity return out of the market.
“And that’s fundamental in paying a good milk price.”