Pressure on Fonterra over Dennington dairy plant closure

At least two dairy companies are interested in buying Fonterra’s soon-to-be-closed Dennington plant — but the NZ dairy giant doesn’t want to sell.

FONTERRA Australia is on a collision course with the Federal Government over its decision to permanently shut its Dennington dairy plant to milk processing, leaving 100 workers out of jobs.

The company’s parent in New Zealand announced last week it was ceasing operations at the factory on the outskirts of Warrnambool by the end of November following a review of its global business.

The company blamed the drought and significant industry change for the imminent closure of the Dennington plant.

“The reduction in the Australian milk pool, coupled with excess processing capacity across the industry, has resulted in heightened competition for milk and the under-utilisation of manufacturing assets,” said Fonterra Australia managing director Rene Dedoncker.

At least two dairy companies have told The Weekly Times they were interested in buying the plant.

But Fonterra indicated it was not willing to sell the factory to another dairy company.

“In this low milk environment, Australian dairy needs less processing capacity, not more, so while we may evaluate options for the site, we consider the most responsible decision for our industry is to close it,” a spokeswoman said.

Federal Member for Wannon Dan Tehan said employment for workers was the No. 1 priority for the region.

“I would be incredibly disappointed if there were dairy companies keen to buy the site and Fonterra didn’t offer it to them,” Mr Tehan said.

“If we can keep the plant up and running, then that would be a great outcome.”

Cartoon: Chris Rule

But one Western District farmer, who did not want to be named, said Fonterra’s past history at Camperdown and Cororooke had shown it would almost certainly not sell the plant to another dairy company.

“They’ll let it rot rather than sell to a competitor,” he said.

Fonterra Dennington worker Frank Kelly said many of the workers losing their jobs were in their 40s and 50s and would struggle to find alternative work. Mr Kelly said only about 15-20 workers were close to retirement age.

The Fonterra spokeswoman said the Dennington factory was at maximum capacity last season, as were all its factories, and the company was having to turn away milk.

“While we have lost some farmers, we’ve also recruited, and our share of the total milk pool remains steady,” she said.

“The reduction in Fonterra’s milk intake this season is in part due to structural changes in the dairy industry since 2016, but also because of the declining milk pool due to the drought, which has led to excess processing capacity across the entire industry and heightened competition for milk as processors compete to keep factories full.”