Aug 25 2015
Cheese manufacturers Murray Goulburn Co-operative Co Limited and Bega Cheese Limited have faced erratic market conditions over the past five years. While dairy prices have risen due to growing global demand, Australian cheese consumption has slowed, with consumers increasingly adopting healthier lifestyles. Australian consumers are also favouring quality over quantity, with sales of fresh cheeses increasing over industry staples like cheddar. As a result, cheese manufacturing revenue is expected to decrease by an annualised 0.7% over the five years through 2015-16, to total $5.5 billion. This decline has been slowed by cheese exports increasing at an estimated 10.8% annualised over the same period, to total $1.2 billion, due to increased demand from Asia. To combat the rise in dairy prices and support revenue growth, Australia’s two largest cheese manufacturers have taken on different strategies such as global expansion and the pursuit of acquisitions.
Murray Goulburn Co-operative Co Limited is one of Australia’s largest cooperative dairy companies. The majority of the company’s revenue comes from manufacturing dairy products, which are sold primarily under the Devondale brand. In terms of cheese manufacturing, Murray Goulburn is expected to outperform the industry, with its cheese manufacturing revenue expected to grow by 2.5% in 2015-16 to $1.2 billion. Murray Goulburn’s industry-related revenue has been aided by the rise in dairy prices over the past five years and growth in international demand for dairy products.
More than half of Murray Goulburn’s revenue is generated from exporting processed foods. The company also produces private-label cheeses for major supermarkets such as Coles. To meet increased export demand, Murray Goulburn has maintained a steady yearly increase in production volumes by providing its dairy farmers with financial support, bulk purchase of grain and interest-free fodder loans. The majority of the company’s recent revenue growth has come from global trade and investment in distribution channels. The depreciation of the Australian dollar since late 2013 has also helped Murray Goulburn capitalise on the growing demand for Australian dairy exports.
Bega Cheese Limited produces around 20,000 tonnes of natural cheddar cheese and 50,000 tonnes of value-added cheeses annually. Unlike Murray Goulburn, Bega Cheese does not focus on exports, with about 80% of its production targeted at domestic markets like supermarket chains and other food-service providers. In 2007, Bega acquired a large slice of Tatura Milk Industries Limited and in 2008, signed a supply agreement with Kraft Foods Australia. In 2011, Bega Cheese merged with Tatura Milk in an effort to increase efficiency. In 2012, the company expanded its Tatura facilities to supply to the Middle East and has since maintained a supply partnership with Fonterra Brands (Australia) Pty Ltd. In the same year, Bega also cut a five-year deal with Coles to provide private-label cheese.
The company’s cheese manufacturing revenue is estimated to grow by 2.8% in 2015-16, to $948.5 million. Bega’s business with Tatura Milk, Fonterra and Coles, as well as the company’s long history, has helped it to continue to grow while focusing on the domestic market. IBISWorld anticipates that the alliance with Kraft and outsourcing of marketing to Bonland Dairies Pty Ltd have helped Bega to grow its market share in the cheese manufacturing industry.
Over the next five years, IBISWorld expects Australian dairy consumption to grow, dairy prices to stabilise, and exports to increase. Product innovation, including functional, gourmet and healthier cheeses will help stimulate consumer demand, while a rise in exports to Asian markets will drive international trade. Both Murray Goulburn and Bega Cheese are well placed to capitalise on these trends.