Lions Dairy plans $40m plant upgrade

29 Jan, 2016 01:00 AM
Lion Dairy and Drinks intends spending $40 million over the next three years upgrading its Bentley milk processing plant.
It will give farmers the confidence to invest in their businesses, knowing that LDD is committed
Lion Dairy and Drinks intends spending $40 million over the next three years upgrading its Bentley milk processing plant.

A $40 MILLION redevelopment of its WA milk-processing operations over the next three years was announced by Lion Dairy and Drinks (LDD) last week.

The company claims it is looking at a comprehensive modernisation of its Bentley processing plant and a reorganisation of its product distribution to underpin growth in market share.

Thirty logistics positions will become redundant at the Bentley site with the proposed outsourcing of warehouse operations to Linfox.

Efficiencies are expected from the outsourcing due to Linfox's logistics experience.

With 26 dairy farms contracted to it, LDD has significantly fewer local raw milk suppliers than its major WA competitors, Harvey Fresh with 47 suppliers and Brownes Dairy with about 60 suppliers.

But a spokeswoman for the company said it was confident it would be able to procure all the milk needed for its expansion plans in WA.

"We recruited an additional three farmers to cover the additional volume that we picked up when we took over the Coles Retailer Own Brand milk contracts in September," she said.

A sale of surplus assets, including product distribution depots at Balcatta and Palmyra, will help fund the redevelopment which will include construction of a new central distribution centre for WA at Bentley.

A new filling line will provide extra capacity for LDD's Dare and Masters brands iced coffees and flavoured milk drinks, as well as its Dairy Farmers and Pura brands white milk.

A significant upgrade of buildings and amenities and a new site exit location, to reduce truck traffic through adjacent residential areas, is also planned.

The LDD site off Sevenoaks Street abuts Leach Highway on its north and west sides but has houses to the south.

Managing director Peter West said the $40m investment in the Bentley plant "makes clear LDD's intent to compete and grow our dairy business in Western Australia over the long term".

"(This) announcement is about ensuring we remain a sustainable and viable operator in the Western Australian dairy market today and in the future," Mr West said.

"The outsourcing of the warehouse operations is no reflection on the people working in this area at the Bentley site.

"The contribution that they have made to our site over many years has been much appreciated.

"Our people are our primary concern right now and we are focused on supporting them and their families through this process."

Mr West said all employees whose jobs had been impacted would receive full entitlements and would be offered outplacement support.

Free independent confidential counselling was also being offered and LDD would consider re-deployment opportunities along with re-location assistance, where appropriate.

The $40m investment was on top of $1.5m invested in the site over the past year.

"This significant investment highlights our belief in the dairy industry in Western Australia and the focused approach we are taking to this market, consistent with our turnaround plans," Mr West said.

"We will continue to target the high-value milk-based beverage category, white milk and other key dairy categories, where we believe we can sustain profitability and category growth over the long term for the benefit of our business, farmers, customers, distributors and other stakeholders."

The investment announcement was welcomed by WAFarmers' Dairy Council president Phil Depiazzi.

"LDD's move will instil confidence and demonstrates commitment to the local dairy industry," he said.

"It will give farmers the confidence to invest in their businesses, knowing that LDD is committed to processing in WA for the foreseeable future."

While the loss of 30 jobs was regrettable, Mr Depiazzi said it demonstrated how tight processor margins were in the WA dairy industry.

"These job losses and tight processor margins can be directly attributed to the sale of $1 a litre milk," he said.

LDD employs more than 7000 people throughout Australia and New Zealand at 34 production sites including large breweries, craft breweries, wineries, dairy farms, milk, cheese, yoghurt and juice sites as well as venues and more than 39 Liquor King retail outlets in New Zealand.

Mal Gill

Mal Gill

is wool and dairy writer for Farm Weekly


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