Bega Cheese has said growth in its branded consumer and food service business, as well as its ongoing diversification strategy has contributed to its 1H20 results, reporting a 14 per cent revenue increase to $741 million.
Export revenue also increased for the company by 17.3 per cent to $230 million, as well as generating a statutory EBITDA of $39.3 million, which dropped by one per cent, and a decrease in its production by 10.4 per cent to 154,456 tonnes.
The drought has impacted particularly on Bega’s Tatura operations in northern Victoria, where total milk processes from direct supply and through toll manufacturing arrangements was 4.6 per cent below the previous year, further affecting earnings.
Bega said it has “continued the transition towards our vision to become The Great Australian Food Company while responding to the ongoing competitive and supply challenges facing the dairy industry”, with its diversification strategy position Bega “with a significantly improved capacity, capability and flexibility” to respond to such conditions.
In 2017, Bega progressed its strategy to reduce its overall exposure to third party manufacturing contracts, dairy commodities and a concentration of milk supply in northern Victoria, which included its divestment of a nutritional powder dryer, and a canning and blending facility, as well as closing its Coburg cheese facility. It also acquired the Mondelez Grocery Business in 2018 and the Koroit dairy facility in Western Australia.
“Bega Cheese has continued to accelerate the development of new product ranges and format extensions across the spreads, snacking and dairy portfolio, as well as increased distribution in retail and foodservice in Australia and overseas,” the company said.
Vegemite grew 0.8 per cent in 1hH20 following the following the launch of its gluten-free Vegemite, promotional activity and improved pricing, while Bega’s peanut butter category grew by 6.5 per cent, driven by its Bega Simply Nuts innovation, and its butter brand Farmers Table entered the market.
International branded food service and retail also had a double digit sales growth of 12.4 per cent.
Further investment in brands and markets, accelerating new product development, rationalising supply chain and manufacturing footprint, and remaining “open to further dairy industry consolidation opportunities” are Bega’s priorities for remaining half of the year.
It will also begin construction on a new lactoferrin plant at its Koroit site, scheduled for commissioning in April and expected to commence operation in FY2021. Bega signed a three-year supply agreement with an undisclosed multinational company for the site last year.
