Major company collapses, 160 jobs at risk

A major Australian food producer, which was once worth $130 million, has gone under.

A major Australian food company that is listed on the ASX has collapsed with 160 employees at risk of losing their jobs.

The Beston Global Food Company has been placed into voluntary administration blaming “a perfect storm of adverse events” for its demise.

The South Australian dairy company employs 160 people in its factories, which produce cheese, butter and milk and include brands such as Edwards Crossing Cheese Company and Mables.

Up to 22 dairy farmers that supplied milk to the company could also be impacted for a brand that was best known for its cream cheese and hard cheeses such as gruyere and parmesan.

The Beston Global Food Company said prior to the pandemic it had relatively little debt but afterwards it “came out the other side with a debt burden which has weighed heavily as interest rates have increased”.

While the business racked up record sales of $170 million for the 2023 financial year, it revealed the past year had been dire in a statement to the ASX.

“Over the last 12 months, Beston has experienced exceptionally high operating costs particularly due to onerous energy prices at a time when Australian farmgate milk prices have been uncompetitive in world markets,” it said.

The company was highly critical of “unintended consequences” of the Australian Dairy Code legislation introduced in 2019, which it said kept farmgate milk prices at high levels but were disconnected from the global prices of dairy commodities.

Beston added as a result, the legislation had contributed to the closure of 11 dairy processing businesses in Australia during the past 18 months.

Beston Global Food Company has collapsed. Picture: Facebook

‘Avalanche of cheaper imports’

The company said it was impossible to be competitive at a global level.

“Favourable weather conditions in quarter two of financial year 2024 substantially increased the supply of milk to our factories, at a time when farmgate milk prices were at record highs," it said.

“Global dairy commodity prices remained volatile during this period on the back of China’s rising domestic production and lower imports.”

Beston Global Food Company also blamed an “avalanche of cheaper dairy imports” that have reached the Australian market during 2023 and 2024 from overseas producers including New Zealand, Europe and the USA, which have impacted the company’s sales margins and short-term liquidity.

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The Murray Bridge dairy factory. Picture: Supplied

300 per cent increase in energy prices

The company also blamed high prices to operate.

“The business absorbed some $28 million in additional costs in the 2023 financial year, including a 300 per cent increase in energy prices,” it wrote.

“However, the persistence of cost pressures particularly with gas, electricity, labour, chemicals and transport in continuing to push up the cost of goods in financial year 2024, along with the higher than-expected milk volumes and farmgate prices that have remained uncompetitive versus global markets, have adversely impacted profits and cash flows.”

The company’s management had sold its meat processing business in July and made operational enhancements to try and offset its losses.

But when a deal to buy its assets from one of Japan’s biggest dairy producers Megmilk Snow Brands fell through, the company was unable to survive.

Its board of directors said the decision to go into voluntary administration was “unavoidable” particularly as the “soaring costs of manufacturing in Australia” had made it “extremely difficult to do so competitively in a global market”.

A deal to buy Beston Global Food Company has fallen through. Picture: Supplied

Market valuation plummets

Beston’s chief executive officer Fabrizio Jorge said he deeply regrets that the Megmilk

Snow Brands offer could not be progressed through to completion.

“The Megmilk offer would have enabled all of the jobs at Jervois to be preserved and would have led to an increase in demand for milk for processing at the Jervois factory over time,” Mr Jorge said.

“It would have represented a win for the workers, a win for our loyal dairy farmers and ultimately would have been a win for the whole of South Australia as the significance of the Jervois plant in producing premium quality, health enhancing products from dairy have become increasingly recognised around the world via the global marketing and distribution networks of Megmilk Snow Brands.”

Beston Global Food Company's will continue to trade while under administration. Picture: Beston

The company’s two production facilities are based in Jervois in the southeast of Adelaide and Murray Bridge, with the factories making butter, milk, mozzarella and other cheeses. It also supplies a product called lactoferrin – a dairy protein used as a diet supplement – which was used by formula companies in China.

KPMG has been appointed to oversee the administration of Beston, which listed on the ASX in 2015 with a market valuation of $130 million.

Its shares last traded in June at a value of 0.3c resulting its in valuation plummeting to $59 million.

“The administrators current intention is to continue to trade Beston while an assessment of trading is undertaken and options for its sale and/or recapitalisation are explored,” KPMG said.

A creditors meeting will be held on October 2.

It comes at a torrid time for companies with other ASX listed companies also going under this year.

This includes brewer Mighty Craft which was sent into administration in July and online retailer Booktopia which had been haemorrhaging money, although it was later bought back from the brink by a new buyer.

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Originally published as Major company collapses, 160 jobs at risk