MORE dairy products and a lot less milk.
Processing giants Parmalat and National Foods announced their plans to "improve the Queensland dairy industry's ailing profitability" at the Queensland Dairyfarmers Organisation (QDO)and Dairy Industry Association of Australia annual conference on the Sunshine Coast last week.
Speaking in front of the largest gathering of Queensland dairy farmers in recent years, the two processors said a more sustainable financial structure was needed for the industry.
Senior representatives from each company announced they were working towards increasing product differentiation on the retail shelves to combat the rise of supermarket owned private labels and ending the oversupply of milk throughout Northern Australia by improving data collection and communication along the supply chain.
Farmers repeatedly heard the message from conference speakers that the recent global financial crisis had changed consumer spending patterns, resulting in a marked increase in price-focused purchases and a strong increase in market share for private label milk.
Parmalat Australia chief executive officer Craig Garvin said the onus was on the processors to change public perception in the milk market by raising the profile of branded products.
"Our branded products receive better profit margins and that will flow through to the farmers," he said.
"In categories like flavoured milk and yoghurt, private labels are not very big at all and that's because the processors have driven their brands really well. I don't think the processors have invested enough into their white milk products to command the increased margin. Where we have valued added milk products such a trim, physical, pure organic etc, they've done a lot better in terms of a sustainable profit margin for the industry."
National Foods director of technical business development, Keith Mentiplay, said the company would double its marketing expenditure to promote their branded products.
However, he said the business had an average annual excess supply of about 80 million litres of milk following the loss of a contract for private label milk to Parmalat in recent years.
He said selling the excess milk on the global commodity market was also not an option due to higher production costs in Queensland and a 10-20c dearer per litre milk price compared to southern states.
"There is not a profitable use for that surplus - therefore, the challenge for the industry is to ensure we do not supply more milk than is needed to meet regional demand," he said.
"This is a month to month challenge but we can develop it with further research and development."
Mr Mentiplay said National Foods would work with QDO and other dairy groups to improve the long term financial viability of the industry. However, with farmers across the state already downsizing their production capacity and laying off staff, many left the conference cynical at the processors' ability to reduce the excess supplies without it affecting the farm gate bottom line.
QDO president Brian Tessmann said a collaborative approach between farmers and processors was crucial to ensuring any reduction in "excess" milk across Queensland did not send more producers broke.
"From a farm level we need as flat a supply as we can - with only little ups and downs - so that the milk they're taking in September is about the same as they're taking on in March," he said.
"But if this is handled badly it could result in some farmers exiting the industry. As it is, there are some farmers already under strain and they are reducing the size of their business."
Parmalat and National Foods are expected to announce their new supply group plans before the end of the year.
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