The big cheese of Australian dairy

For over a century Warrnambool Cheese & Butter has been exporting dairy products. Now it is investing heavily in market research, R&D, cutting edge technology and new plant and forming partnerships with companies based around the world in order to satisfy the appetite of Asia’s burgeoning middle class.

When a handful of dairy farmers in rural Australia came together to form a co-op in 1888 it’s unlikely they harboured plans of world domination but 125 years on that is what Warrnambool Cheese & Butter (WCB) has largely achieved.

Starting out with a shipment of 10 tonnes of butter to London in 1893, WCB has developed into one of the global dairy industry’s major players, exporting to 45 countries and partnering with the likes of Kraft to produce inventive new food products.

Asked what’s driven WCB’s inexorable growth from the 19th through to the21st century, its CEO, David Lord, suggests a combination of specialisation and innovation. “This business knows what it is and has never tried to be something other than it is,” Lord says. “It has always wanted to be a leader within the dairy industry and while it’s expanded enormously – we now have 600 rather than six farmers supplying milk, for example – the company has remained focused on the same product categories it knows well.”

WCB now produces 150,000 tonnes of dairy product per annum and expects to turn over $600 million in the coming year. And with the growth of a health-conscious Asian middle-class, WCB’s best centuries are probably still ahead of it.

“We’ve exported to Japan for decades,” Lord observes, ”and it’s still our biggest market but obviously other Asian countries are now getting richer and Westernising their diets. Once people reach a certain level of affluence the first thing they do is improve the diet of their family and there’s been a major increase in dairy consumption in Asia, particularly in the form of lower-lactose products such as infant formula, yoghurt and drinking yoghurt.”

WCB has responded to the Asian demand for particular varieties of dairy products by investing heavily in market research and R&D, building new plant and teaming up with food industry behemoths to break into new markets.

“Rather than just giving their children infant formula when they are babies, Asian parents like to feed it to them, in one form or another, up until the teenage years,” Lord says. “We’ve formed a joint venture with Royal FreislandCampina, the largest dairy co-op in the world, to produce Galacto-oligosaccharide or GOS. That’s a prebiotic that stimulates the growth and activity of beneficial bacteria in the colon and which is in big demand for use in infant formulas.

“Lactoferrin, a protein with antibacterial properties, is another highly prized ingredient in infant formula so we are investing in a Lactoferrin facility that should be supplying Chinese Infant formula manufacturers by early next year.

“We’ve also upgraded our skim milk dryer to enable it to produce much higher specification powders, not just for use in infant formulas but also in products such as canned coffee drinks and drinking yoghurts. Plus we’ve invested in cream cheese making equipment and, with our friends at Kraft, will be producing a specific export formulation cream cheese later this year that will be used in a variety of products in Asian markets.”

As promising as Asia is, WCB is not neglecting the rest of the world. “Something people are often surprised about is how much product we ship to the Middle East,” Lord says. “There is a tradition of using dairy products such as yoghurt and cheese in Middle Eastern cuisine and, once again, as people have grown wealthier they’ve had more money to spend on a dairy-rich, high protein diet.”

One of the advantages of having been around for 125 years is the opportunity to have formed solid relationships and WCB prioritises both developing strong networks and having unmediated contact with its customers.

“Ever since the early days 60 per cent of our revenues have come from exports. We always try to avoid using a distributor so we can deal as directly as possible with either the individual consumer or company in another country that is buying our product. Especially with companies, we like to have a close relationship, particularly a close technical relationship, so we can design products that best suit their specific needs. It’s that approach that has allowed to WCB to both grow and increase its returns.”

Lord argues that while WCB is fortunate to be based in one of the prime dairying regions of a country that has a strong reputation for providing safe, high-quality produce, its long history of success hasn’t been a matter of luck.

“If WCB is innovative it is because it has had to be,” he says. “It’s a very competitive marketplace and every day we’re up against the Americans, Argentinians, Brazilians, Europeans and New Zealanders. Every one of our 480 employees, from the guys on the factory floor to me, is expected to be constantly on the lookout for ways to improve things. That’s just the way the workplace culture operates here.”