WAFARMERS has welcomed Bega Cheese's entry into Western Australia's white milk market through the purchase of Lion Dairy & Drinks' dairy assets.
Dairy section president and Forest Grove dairy farmer Ian Noakes said he had asked executive officer Laura Stocker to write to Bega to ask what its intentions were for the WA portion of Lions' business and to offer any assistance WAFarmers might be able to provide.
"At this early stage who knows what benefits there might be for WA dairy farmers," Mr Noakes said on Monday.
"But at the very least, we can expect an injection of confidence into the local dairy industry from this.
"Bega is a very well run company if you look at where it has come from.''
Bega was created in 1899, it operated as a South Coast New South Wales dairy farmers' co-operative until floating on the Australian Securities Exchange in 2011 then transitioning from cheese maker to foods producer, with drinks now added to its branded portfolio.
Bega's Australian Competition and Consumer Commission pre-approved purchase of Lion is expected to be completed by the end of January.
"I remember hearing (Bega executive chairman) Barry Irvin speak at a dairy conference some years ago and I was impressed by his knowledge of the industry,'' Mr Noakes said.
"One man doesn't make a company, but under his stewardship Bega has become the Australian-owned dairy industry mainstay, particularly after the problems Murray Goulburn ran into.
"I know Bega picked up a lot of Murray Goulburn suppliers at that time.
"It is a company that has a focus on dairy - it was run by dairy farmers - and it has a focus on retaining Australian products (Bega bought back Australian food icons Vegemite and Bonox in 2017 and it will now own the Masters milk brand which once traded for 50 years in WA).
"As the only Australian-owned milk processor in WA, it will probably do well with consumer support."
Mr Noakes said the expected flow-on of confidence to the local dairy industry from the creation of an Australian-owned major national dairy company in Bega was welcome after some difficult years for farmers with drought, high feed prices and another dairy processor reducing the range of products it produces locally.
He said it was possible Bega might decide to produce a wider range of products in WA at the recently upgraded Bentley dairy processing factory it now owns as part of the deal with Lion, so there may be some potential for the local dairy industry to expand.
As reported in Farm Weekly last week, under Lion the Bentley factory produced Masters brand white milks, iced coffee and flavoured milk drinks, as well as Dare and Farmers Union brand iced coffee and Pura cream.
Since October 1, the factory has also processed and packaged milk purchased directly from dairy farmers by Coles for Coles' Home Brand milks and creams for its WA supermarkets.
Bega will inherit Lion's 20 WA dairy farmer suppliers and it is expected to honour their milk supply agreements which run until August next year.
The sale of Lion's dairy business to Bega Cheese, has also been welcomed by Lion's largest supplier group, Dairy Farmers Milk Co-operative (DFMC).
"We are very pleased to hear that Bega has bought Lion Dairy & Drinks," said DFMC chairman and Gympie, Queensland, dairy farmer Andrew Burnett.
"The iconic Dairy Farmers brand is back in Australian ownership, jam-packed with local milk nationwide.
"With more than 120 years of heritage, it is clear that Bega is ideally positioned to drive the dairy and drinks business into the future and we look forward to continuing our long-term milk supply partnership."
DFMC supplies about 200 million litres of milk a year in a long-term partnership.
The co-operative has more than 300 members from more than 200 farms in Queensland, New South Wales, Victoria and South Australia.
According to Bega, the acquisition of Lion's dairy and fruit juice business for a net price of $534 million, will lift its national annual milk intake substantially from 955 million litres to 1.7 billion litres.
"The acquisition delivers important industry consolidation and value creation with synergies across the entire supply chain," chairman Mr Irvin said on Friday after it was confirmed Bega was buying Lion's dairy and fruit juice business.
"The expanded product range, manufacturing and distribution infrastructure and brand portfolio realises our ambition of creating a truly great Australian food company."
Along with the Masters brand, Bega will own Pura, Dairy Farmers, Farmers Union, Dare and Big M dairy brands and Juice Brothers, Berri and Daily Juice fruit juice brands.
It will produce the Yoplait yoghurt brand for Australia and some South East Asian markets and the Vitasoy range of plant-based milk alternative products under licensing agreements, as well as retaining a minor shareholding in Made By Cow.
It will add white milk, flavoured milk, yoghurt, dairy desserts and fruit juice to its existing retail and food service products range which includes cheese, Vegemite and peanut butter spreads, peanuts, honey, mayonnaise and other condiments.
Adding to its own production facilities in NSW, Victoria and Queensland, Bega will have a total of 20 manufacturing sites across Australia, apart from the Northern Territory.
The deal also gives Bega access to Australia's largest cold chain distribution network, including 13 distribution centres in WA.
Synergies created by reorganising the merged businesses are expected to generate $41m in operational cost savings, Bega said.
Last Friday Bega announced the successful completion of its one share for 4.5 shares placement and institutional entitlements offer, part of a two-stage share offer expected to raise $401m towards the purchase of Lion's dairy and drink business.
A retail share offer was scheduled to open yesterday, Wednesday and will close on Monday, December 14.
Lion, which is owned by Japanese brewing giant Kirin, confirmed the sale to Bega, along with the sale of its specialty cheese business to Saputo Dairy Australia for $280m in October last year, represents "full divestment of the dairy and drinks business".
"The completion of this sale will enable further investment behind our priority categories of core beer, craft beer and seltzer in both domestic and international markets," Lion said.
It had been trying to sell the dairy and drinks business for three years.
In August Federal Treasurer Josh Frydenberg stepped in and blocked the sale of Lion Dairy & Drinks to China Mengniu Dairy Company Ltd for $600m, citing national interest as the reason.
