Dairy brand shake-up
Pura, Big M may change hands
A STRING of major Australian dairy brands including Pura, Big M, Farmers Union and Dairy Farmers could soon change hands as the shakeout in the sector continues.
Japanese beverage titan Kirin has launched a strategic review of its struggling Lion Dairy and Drinks business, which owns a stable of prominent brands.
Kirin said yesterday the review would take about four weeks and consider all options, including a sale and reinvesting in the division.
Lion’s alcohol brands such as beer labels James Squire, Toohey’s and XXXX are part of a separate division and not covered by the review.
Obvious bidders for the dairy operations would include growth-hungry group Bega Cheese, private equity interests and foreign dairy heavyweights Fonterra, based in New Zealand, and Parmalat, from Italy, which both have a major presence in Australia.
Canadian dairy titan Saputo is not seen as a likely bidder given competition issues and its focus on cheese and other dairy products.
Saputo four years ago beat Lion in a race for control of Warrnambool Cheese Butter Factory and last year paid $1.3 billion for Victorian processor Murray Goulburn.
Although Chinese bidders may also be keen on gaining control of a major milk processor, a takeover by a Chinese company could face a hurdle at the Foreign Investment Review Board and, in the prevail- ing political climate, may not carry enough support.
Kirin bought National Foods for $2.8 billion in 2007 and later Dairy Farmers for $910 million, combining the companies.
In 2010, it wrote $831 million off the value of the companies, another $1 billion in 2011 and a further $308 million in 2012. Total impairments since 2007 have racked up to more than $2 billion.
Lion chief Stuart Irvine said the turnaround of the division was complete and its future could now be considered.
Mr Irvine said that over the past three years, Lion Dairy and Drinks had “made great progress in driving innovation, growing brand health, improving quality and service and step-changing supply chain efficiency and agility”.
“The investments we have made have grown profitability and created a sound platform for future growth with our high-quality brands and leading Australian cold-chain distribution network at its heart.”
For 2017, the dairy and drinks business chalked up $1.78 billion in sales.