When Bega Cheese' takeover of Lion Dairy and Drinks is completed early next year its milk processing business will grow from four to 15 dairy factories, plus two juice plants, and joint venture ownership of one of Australia's big name plant "milk" facilities.
Lion has dairy plants in North Queensland and Brisbane, Perth, Adelaide, Hobart, Melbourne and Morwell in Victoria, and Penrith and Wetherill Park in outer Sydney.
It is also the majority partner in a joint venture with Bega - Canberra's Capitol Chilled Foods - and has a half share with Hong Kong partner Vitasoy International in the Vitasoy plant-based beverage facility in Wodonga on the NSW-Victorian border.
On the fruit juice front, Lion owns the Berri, Daily Juice and Juice Brothers brands, processed at Leeton in southern NSW and Smithfield in Sydney where Zooper Dooper freezable flavoured ice blocks are also made.
Bega Cheese' processing portfolio, is comparatively rather modest.
It has five dairy factories based on its original home turf on the NSW South Coast and in Victoria at Tatura, Strathmerton and Koroit, plus its Port Melbourne spreads and sauces plant.
The Peanut Company of Australia division, bought in 2017-18 to supply its peanut butter needs, has processing operations in southern Queensland at Kingaroy and Tolga on the Atherton Tableland.
Big brands unite
Bega's fast growing dairy and grocery business, which includes Australia's top selling cheese name, Vegemite, the nation's biggest selling peanut butter range and the recently-launched B Honey, will now be complemented by Lion's top sellers in the flavoured milk and yoghurt categories.
Lion Dairy and Drinks brand names include the Pura, Dairy Farmers and Masters white milk and cream lines; Dare, Big M, Dairy Farmers Classic and Farmers Union flavoured milk, and Yoplait and Farmers Union and Dairy Farmers yoghurt.
Lion is Australia's market leader in flavoured milk, yoghurt and juice sales and number two in branded white milk.
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Branded product sales represented only about 20 per cent of Bega's total business until it bought Kraft Foods' brands from Mondelez Australia for $460m in 2017.
Much of its southern NSW and Victorian dairy business had been based on bulk dairy product sales or toll processing.
Now, on the back of its Mondelez and Lion acquisitions, Bega expects branded products to represent 70pc of sales within three years.
Lion also has an impressive cold storage distribution network which will add clout to Bega's domestic distribution efficiency and sales ambitions.
Bega currently operates just 10 cold stores, whereas Lion's three national distribution centres are backed up by 133 regional cold stores and depots.
Lion also has an alliance with big French dairy co-operative group Sodima which entitles the local dairy group to produce and sell its famous Yoplait yoghurt brand in Australia and South East Asia.
However, exports of milk, cream, yoghurt and dessert products overseas sales have not blossomed as Lion had expected under the ownership of Japanese food and brewing giant Kirin Holdings.
"Lion's international business is much smaller than Bega's $500 million export sales, so that opens up the potential to piggyback some of those products into our established channels," said Bega Cheese executive chairman, Barry Irvin.
"But it's not necessarily as simple as it sounds.
"Fresh dairy products like yoghurt are harder to build into large volume footprints than bulk products like cheddar or nutritional powders.
"There may be some good export growth opportunities we can open up over time, but we will have to see what works best.
"We certainly have not predicated this deal on the prospect of increasing our export results overnight."
Meanwhile, Lion's largest supplier group Dairy Farmers Milk Co-operative has fully supported Bega's purchase and looked forward to starting talks with Bega about growing milk supplies from its family farms.
DFMC, which supplies about 200m litres of milk annually from 250 farms, applauded the iconic Dairy Farmers name coming back in Australian ownership.
"We're very pleased Bega has bought Lion Dairy and Drinks and the Dairy Farmers brand, which was established by our predecessor co-op," said chairman and Queensland dairy farmer, Andrew Burnett at Gympie.
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The story What has Bega actually bought with its $534m Lion dairy deal? first appeared on Farm Online.