INCREASING milk supply and building trust among its Tasmanian suppliers will be two key aims for new dairy industry player Saputo.
Last week the company’s chairman and chief executive officer Lino Saputo visited Tasmania to meet existing suppliers as well as farmers who may be interested in moving over to the company.
Farmers in the North-East are being invited to supply Saputo’s factory in Smithton — something that did not happen under the previous ownership of Murray Goulburn.
Based in Canada, Saputo has owned and operated Warrnambool Cheese and Butter for the past four years and took over Murray Goulburn’s assets earlier this year when it bought out the troubled co-operative.
Mr Saputo said the Smithton factory was a key asset and while it was now producing milk powder, there could be opportunities for more value-adding down the track.
“We’re going to look at all the assets we have, the milk we have in each of the region and we’re going to see how we can add value to the solids of milk,” Mr Saputo said.
“We do manufacture commodity products very well, but I think there’s some value going into more value-added products.”
The Smithton plant is operating at 58 per cent capacity.
‘We’re looking at the opportunity to take on more milk,” Mr Saputo said.
The aim is to get the company’s processing facilities operating at between 90 per cent to 95 per cent, which will mean growing the overall milk intake from 1.9 billion litres to about 2.5 billion litres.
“That’s’ not going to come overnight, it will take some time to get there,” he said.
While there has been some criticism of Saputo’s opening farmgate price of $5.75 per kilogram of milk solids, Mr Saputo described it as fair.
“At the end of the milking year, I’ll tell you we will have leading competitive prices for milk, so it doesn’t really matter what the opening price is.”
He said opening prices were just an indication of what suppliers could consider building their budgets around.
Mr Saputo said how producers were treated was a big factor in attracting suppliers.
“We offer things perhaps a little bit different to other companies,” he said.
“And if you look at our track record with WCB, we’ve made some commitments that we’ve honoured over the four years we’ve been operating.”
Mr Saputo said this included treating suppliers with respect and loyalty and operating with complete transparency.
“Back in 2016 when there were the step-downs and clawbacks, two of our largest competitors did that, we chose not to do that,” he said.
“With our WCB suppliers we felt that would be a breach of their trust, so we chose not to do that. And it cost us quite a bit of money to maintain the price when the international markets were collapsing.
“If we make a commitment to our suppliers, they should trust that we’re going to honour our word,” Mr Saputo said.
While he said last week he did not back the push for a mandatory code of conduct for the dairy industry, this week he surprised many by coming out to support a mandatory code.
Mr Saputo said the code should include laws to make price claw-backs illegal.
Mr Saputo is the third generation of the family involved with the business, which started trading 64 years ago
“This is not our first rodeo, we’ve been around the block a couple of times so we understand the industry very well.
“I’m the caretaker for the next generation and I really don’t want to mess it up, so we have to be careful about the things we promise and deliver on the promises we make.”
While he said the current trade tension between China and the United States was worrying, Mr Saputo said it could potentially create export opportunities for countries like Australia and New Zealand.
In Australia about half of Saputo’s products are aimed at the domestic market. Across operations in the US, Argentina and Australia Saputo exports to 40 to 50 countries.
While the company will expand production of protein-based nutritional products, Mr Saputo said commodities would remain in the mix.
“Innovation is important,” he said. “But that doesn’t mean we’re going to shy away from commodities, because we can process commodities very well and sell them very effectively.”
This week Bega Cheese announced it was buying MG’s former Victorian Koroit processing plant for $250 million. Australia’s competition watchdog forced Saputo to divest the plant as part of its $1.31-billion buyout of MG.
Article sourced from https://www.weeklytimesnow.com.au