Australian dairy manufacturing closes factories in competition crunch

With Sara Lee and an award-winning ice cream brand closing doors, why is dairy-related manufacturing in strife?

Life isn’t so sweet for dairy and associated food manufacturing in 2023, with Sara Lee just the latest casualty in a broader industrial malaise.

The popular dessert manufacturer announced last week it had gone into administration after five decades of churning out frozen cheesecakes, pies and ice creams.

Administrators plan to salvage the Lisarow factory, which employs 200 people near Gosford, about 90km north of Sydney but its future is hardly certain.

Sara Lee is the latest in a long line of dairy-linked factories to either go into administration or shut up shop altogether.

Gundowring Ice Cream, which has claimed multiple Australian Grand Dairy Awards, also indicated this month that it would close in the new year.

Australian Food and Grocery Council chief executive Tanya Barden said domestic food manufacturing was under strain from declining productivity and surging competitiveness from imports.

“Food manufacturers are facing increased pressure after years of unprecedented challenges,” Ms Barden said.

“Food and grocery manufacturing is a globally connected industry and there will always be a role for domestic and imported products in offering consumers choice.

“What we need to ensure is that local manufacturing is globally competitive. However currently our cost structures are making it harder, plus there isn’t a level playing field – we’re competing against many other countries that provide investment support to food manufacturers.”

Sara Lee managing director Mark Mackaness and long-serving employee Kym Gurney celebrate the company’s 50th birthday at its Lisarow factory in 2021. Picture: Troy Snook

While Sara Lee and Gundowring have captured attention recently, the first indicator of a tough year in dairy manufacturing was shortly before Christmas 2022, when Saputo announced the closure of its Maffra factory.

The longstanding Gippsland site closed in its entirety in February, with Saputo also curbing operations at its Mount Gambier and Leongatha sites.

Rival processor Bega also shut its Canberra factory in February while smaller operators have been wiped from supermarket refrigerators.

Country Valley Milk, Made by Cow, Margaret River Dairy Company and Peel Valley Milk are all either in administration or already defunct following the industry-wide crunch.

Australian Dairy Farmers president Rick Gladigau said rising electricity prices had undercut domestic manufacturing’s competitive edge.

“We know processors and manufacturers are hurting from the same input cost challenges faced by dairy farmers,” he said.

“Energy costs in particular are making for challenging business conditions, while processors also grapple with excess capacity in their plants.”

Mr Gladigau said consumers were willing to prioritise Australian produce but the price was not always right for some.

“Support for Australian dairy remains high – the annual per capita consumption sits at 15kg of cheese and 93 litres of milk,” he said.

“But we are facing competition from heavily subsidised international imports.

“It is important that the dairy industry does what it can to keep prices down. But it’s also critical that Australian shoppers recognise the importance of supporting Australian dairy.”