The fierce $500 million takeover battle for Victorian group Warrnambool Cheese & Butter put the dairy industry onto the world stage earlier this year, and raised the sector’s profile as a potential export powerhouse for Australia.
But after Canadian giant Saputo roared into the Australian market with its WCB takeover – following a long and bitter battle with Murray Goulburn and Bega Cheese – there are still nine processors in Australia and Mr Helou says that has to change.
“There are nine processors in this market, and the majority of them are focused on the domestic market which is heavily dominate by retail power,” Mr Helou told Financial Review Sunday on Channel Nine.
“I’m on the record saying that in the next few years the number of processors will halve and that, in my opinion, is an inevitable revelation.”
Murray Goulburn, which markets its product under the Devondale brand, is the nation’s biggest dairy exporter, collecting and processing one third of Australia’s nine billion litre milk pool from its 2500 farmer-shareholders.
Mr Helou says he has moved on from the Warrnambool takeover scrap and is now focused on paying farmers a better milk price.
Giving farmers a fair go
“That is the stimulant for farmers to invest in their own farms and drive production. Australia should be producing more than nine to 10 billion litres of milk. We should be producing 15 billion to 20 billion litres,” he told the television show.
Processors such as Saputo and Murray Goulburn want that extra milk to turn into milk powders, infant formulas, cheeses and other products to feed Asia’s rapidly growing appetite for dairy foods.
Mr Helou says that China “came from nowhere” 10 years ago to become the world’s biggest dairy importer, with the annual value of its dairy imports surging from around $300 million to about $6 billion today.
“China will define dairy foods globally for the next 10 to 20 years. It is going to be dependent on imports and Australia has a real role to play. It could be very prosperous,” he said.
Parmalat Australia, the nation’s fifth biggest processor and a wholly-owned subsidiary of French behemoth Lactalis, also has its eye firmly set on Asia.
Parmalat chief executive Craig Garvin said Australia’s reputation as a clean and green producer means Australian product is highly prized in Asian markets.
“We know from the research we’ve done that Asia values the source of Australian quality very highly,” he said.
Mr Garvin, who forked out $120 million for Western Australia’s biggest dairy exporter Harvey Fresh this year, also thinks consolidation is inevitable as players build scale to maximise the export opportunity on Australia’s doorstep.
“We will see more consolidation. In Australia domestically you need scale to compete…the number of players that we have now is unsustainable,” Mr Garvin said.
One player everyone is watching is Lion, which is owned by massive Japanese food and beverage group Kirin.
Lion has written off hundreds of millions of dollars from its dairy assets in Australia and has recently lost a number of large contracts to supply the major supermarkets.
Lion’s new dairy and drinks boss, Peter West, will give his first interviews this week and outline his vision for a business that needs a dramatic shake-up.