Australian Dairy Nutritionals to stop milk and yoghurt production in Camperdown

Australian Dairy Nutritionals will shut its fresh milk processing plant in Victoria as inflation hits the small cap company.

Camperdown Dairy, a historic Victorian brand, will stop producing fresh milk as rising costs push its owner to turn to better margins on milk powder products.

The ASX-listed Australian Dairy Nutritionals, based in the southwestern Victorian town of Camperdown, on Tuesday said it would cancel its fresh dairy produce due to rapidly rising costs that had eroded margins. Woolworths supermarkets stock Camperdown milk in their stores.

Australian Dairy Nutritionals said the move would mitigate staffing shortages and allow it to focus production on higher-margin products such as infant formula and nutritional supplements, but three staff might lose their jobs.

It said margins on fresh milk products had made it uncompetitive to continue, with nearly all suppliers increasing prices by more than 10 per cent and logistics costs nearly doubling.

Australian Dairy Nutritionals will shut its fresh milk processing plant in Victoria. Picture: Andy Rogers

The dairy group noted its recent costs for fresh, unprocessed milk were up 26 per cent above previous records set last financial year. This has seen a 50c increase in the cost of production for each two-litre bottle of milk.

Australian Dairy Nutritionals chief executive Peter Skene said the end of fresh milk production had been long considered after the business moved to build its new processing plant in 2020.

But the recent price spikes on raw milk had sealed the deal.

“There’s a global shortage of milk,” he said. “There was a bidding war in the last month. It’s squeezing the hell out of a lot of domestic guys.”

Fitting of Australian Dairy Nutritionals Group's processing plant in Camperdown. Picture: Supplied

Meanwhile, Mr Skene said, staff shortages had made it increasingly difficult to operate the company’s two sites, which process fresh and powdered products respectively. “We have an EBA which is well above the base rate, it’s 20 per cent plus above the award rate and we’ve had to be pretty competitive in pay rates,” he said. “Bulla in Colac are paying $1000 for anyone who refers someone and they’re there in three months’ time.”

The announcement came a day after Bega chairman Barry Irvin told The Australian of a 30 per cent spike in its own farmgate milk prices, and warned of shelf price hikes to come as processors and supermarket chains pass on costs to consumers.

Australian Dairy Nutritionals’ move to cut all fresh milk production is expected to see a $4m decline in short-term revenue across the business. However, it will deliver a $1m benefit to the bottom line due to cost savings.

There will also be some direct costs due to the Camperdown Dairy site closure, but these are not expected to be material.

The medium-term plan for Australian Dairy Nutritionals, formerly known as Australian Dairy Farms, is now to focus on growing nutritional and infant formula products.

There has been recent price spikes on raw milk. Picture: Zoe Phillips

The business recently signed an agreement in February to stock its milk powder in Chemist Warehouse stores.

It is seeking to secure approvals to export into the US. The Camperdown brand, which Australian Dairy Nutritionals picked up when it occupied the Camperdown site in 2016, will be retained in regional Victorian.

But the Camperdown Dairy site will be mothballed and used to store milk powder as the business attempts to secure export licences.

The group flagged interested buyers had already approached it with offers to purchase the $3m in processing equipment at the dairy or take over the site. On Tuesday, Australian Dairy Nutritionals said it expected the milk powder business to deliver $750,000 of additional revenue in the 2023 financial year.

Originally published as Australian Dairy Nutritionals to stop milk and yoghurt production in Camperdown