Parmalat backs products to make a splash in Asia

Parmalat backs products to make a splash in Asia


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Parmalat Australia produced a nine per cent rise in annual revenues to $1.8 billion in 2016 in a fiercely competitive dairy sector

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Parmalat Australia, which owns the big-selling milk brand Pauls, Vaalia yoghurt and Oak flavoured milk, produced a nine per cent rise in annual revenues to $1.8 billion in 2016 in a fiercely competitive sector where large rival Murray Goulburn has been in turmoil.

Parmalat, owned by French dairy giant Lactalis, has a resilient Australian business where Pauls is the leading white milk brand, and has also increasingly been making inroads in Asia, where the UHT long-life version of Pauls is the number one seller in Hong Kong.

Parmalat Australia chief executive, Craig Garvin, said conditions were tough in Australia and the company was focusing on building up its brand and eyeing more exports to Asia.

"We're backing our brands, trying to make our business as efficient as we can, taking costs out and making quiet acquisitions," Mr Garvin said.

Oak has gained extra prominence through a sponsorship deal with Port Adelaide in the AFL, where the Oak logo is emblazoned on Port guernseys.

An extra spotlight was on Port on Sunday as it played in the AFL's historic first match in Shanghai.

Exports are continuing to increase and Mr Garvin said the momentum was accelerating in the Asia strategy.

Parmalat Australia's net profit after tax in calendar 2016 was $28.5 million, to be 19 per cent lower than a year ago as the firm stepped up its spending on brand building and advertising.

Sales revenue was $1.79 billion in the 12 months ended December 31 compared with $1.65 billion in 2015.

Earnings before interest, tax, depreciation and amortisation were $92.5 million in 2016 compared with $99.2 million, according to the financial statements lodged with the Australian Securities and Investments Commission.

Mr Garvin didn't want to comment on the impact of the broader dairy sector stemming from the strife that Murray Goulburn (MG) found itself in.

But one of the knock-on impacts was that Parmalat had been able to recruit extra dairy farmer suppliers.

"We've picked up some new farmers. We're interested in long-term relationships," Mr Garvin said.

MG, Australia's largest dairy processor, suffered a mass exodus of about 500 suppliers in the past year as the co-operative made a series of strategic blunders and enraged most of its supplier base.

A new chief executive, former Carlton and United Breweries boss Ari Mervis and new chairman John Spark, are trying to retrieve the situation.

Mr Mervis on May 2 announced a sweeping restructure and a sharp reversal in strategy when it ditched a hugely unpopular scheme to claw back milk payments already made to dairy farmers.

Mr Mervis –  who started in the role in February, after the company lurched from crisis to crisis under previous management –  is trying to stem the exodus of farmer suppliers by scrapping the scheme.

He is also shutting down three manufacturing facilities in Victoria and Tasmania, suspending dividends and booking $410 million in writedowns in his overhaul plan.

Parmalat Australia, which has a workforce of 2350 people, also has a range of speciality cheeses under the Lemnos, President and Galbani brands and sells Ice Break iced coffee.

It expanded in early 2016 with the acquisition of Fonterra's Tamar Valley yoghurt and dairy dessert.

Mr Garvin said investing behind the company's brands was an important part of the strategy.

"We're sticking to our long-term strategy. We're continuing to invest in the Australian market," he said.

  • This article first appeared in The Australian Financial Review
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