Dairy cooperative Challenge Dairy is expected to unveil a second tilt at the Chinese market just eight months after it dismantled a $25 million dollar joint venture with a large Chinese dairy company.
Dairy cooperative Challenge Dairy is expected to unveil a second tilt at the Chinese market just eight months after it dismantled a $25 million dollar joint venture with a large Chinese dairy company.
The Challenge management will this week ask cooperative members to approve a three-year business plan, key to which is understood to be new exporting arrangements.
China is seen as a likely export market because of its huge domestic market and growing consumption of dairy products.
China’s Ambassador to Australia, Fu Ying, said in Perth earlier this year that Chinese domestic dairy consumption was increasing due both to dairy’s growing affordability and a government push to improve health.
Challenge Dairy chairman Larry Brennan told WA Business News in July, following the dissolution of the Beijing Sanyuan Foods deal in March, that the growing Chinese market remained in the cooperative’s sights.
While he would not comment on the new business plan, Mr Brennan said it would take Challenge forward over the next three years. Exporting was a key feature, he said.
Mr Brennan said the cooperative, which posted a $3.6 million loss last year, had worked hard to restructure since December.
Key new management and marketing staff had been hired and capital had been injected into the business in order to move away from producing commodity-based products into more value-added products – such as a new waxed cheese range.
However, while much of the business had turned around, a portion remained problematic, he said.
“Eighty per cent of the business is good, it is that 20 per cent which is dragging us down,” Mr Brennan said.
Currently that 20 per cent, or 20 million litres of the 100mL of milk Challenge produces each year, is turned into skim milk powder.
The powder, despite the current high commodity prices and the relatively low Australian dollar, is only producing a minimal return.
It is understood Challenge has been looking for a value-added export market for that 20mL of milk.
Mr Brennan wouldn’t comment on possible export markets, however he has recently been in China and in Singapore representing Challenge.
Challenge currently exports a small portion of liquid milk to Singapore under a deal with food and beverage company Fraser and Neaves.
Also, despite an MoU between Sanyuan and Challenge, the Beijing-based company is not expected to feature significantly in the new business plan.
The Challenge development comes as another group moves to form a second farmer-owned cooperative in the State’s dairy industry.
At this stage, however, the finer points are yet to be worked out.
