The Organic Dairy Farmers Australia (ODFA) Co-operative was formed a decade ago by a small group of Victorian dairy farmers who decided to buck tradition and go organic. Today, it supplies 80 per cent of Australia’s organic milk and has its own range of branded products.
The co-operative supplies organic milk to Parmalat for its Pure Organic Fresh Milk range and to other producers as an ingredient for organic products, including the five:am yoghurt company.
Around a quarter to a third of its milk is used for its own brand cheeses and long-life milk. These are produced by contract manufacturers and sold in supermarkets under the True Organic Brand and to the independents under the Organic Dairy Farmers of Australia brand.
ODFA currently exports between five and ten per cent of its products – predominantly long-life-milk with its main markets being China, Singapore and Hong Kong in that order. Its sales to China doubled last year, admittedly off a small base, although organic certification is relatively expensive in China and this reduces its margins.
In line with the organic industry as a whole, ODFA has been experiencing strong growth, with last year being its most successful. Its milk share prices were 50 per cent above the year before, meaning the distribution of profits to its farmer members were 50 per cent higher. Last year, it also increased its number of suppliers from 15 to 22 and grew milk volumes by 20 per cent.
While the effect of the supermarket milk price war on dairy farmers has been well publicised, Bruce Symons says that it has had no noticeable effect on organic dairy sales.
“Organic milk is a different market and the impact has been minimal,” he says. “If someone’s looking for the cheapest milk on the shelf then they’re not going to be buying organic, there’s such a big difference in price.”
Parmalat’s Pure Organic Fresh Milk retails for three dollars a litre – three times the price of Coles dollar-a-litre milk – but it has sustained growth of between five and ten per cent per annum for the last five years. Despite ongoing food deflation, he says people are willing to pay extra for organics because they value the taste and understand the benefits of organics.
He adds that the Victorian dairy industry – which produces 60 per cent of milk in Australia – has been less affected by the price wars than NSW or Queensland as it is better climatically suited to producing milk.
“The cost of producing milk in Victoria is lower, so the industry is less affected by the downward [price] pressure,” says Symons.
“There’s also a big export market out of Victoria, so if the local market is tough then there’s an alternative.”
Sustaining and driving growth
While benefitting from strong consumer demand for organic dairy, ODFA is currently working to reduce its costs by taking greater control of its supply chain in order to sustain and drive future growth.
Symons says a major challenge for the co-operative has been accessing manufacturing assets with the necessary capacity to create its products, particularly its mainstream cheeses. As a result of having to work with a number of contract manufacturers to produce its required volumes, the process becomes far more costly.
Its first step in addressing this issue is a joint venture with Aussie Farmers Dairy, a subsidiary of Aussie Farmers Direct (AFD). The two businesses are jointly investing $1.2 million in a new butter manufacturing venture that will produce traditional butter for AFD and certified organic butter for ODFA.
The new processing facility will be part of an upgrade of the existing AFD in Camperdown, WA, and will include raw material handling equipment and butter-making machinery.
Butter production is expected to start by the end of June 2013 and the facility is expected to produce one to two million packs of butter each year, with the capacity to produce double this quantity if required.
ODFA currently imports its branded organic butter from New Zealand as it’s virtually impossible to source commercial quantities of Australian-produced organic butter, according to Symons. However, he believes it’ll be far easier to sell a locally produced organic butter and hopes to quadruple its current volumes of around 50 tonnes per annum in the next couple of years.
AFD was an appealing partner for ODFA because it has some existing infrastructure, such as milk silos and pasteurisers, that can be used by the joint venture. Symons explains that their butter requirements are also roughly the same, so by combining their volumes they will be able to invest in equipment on a larger scale that is more efficient.
While the venture is in the early stages, Symons says there could be other opportunities and new channels opening up in the future as a result of the partnership. Once it starts making its own butter, it can look at salted, unsalted and cultured varieties, as well as expanding into food service or selling butter as an ingredient. There may also be opportunities for AFD and ODFA to manufacture other products together.
“We’ve certainly done some brainstorming about what other products might be suitable and then considered what equipment would be required and what it’d cost, but nothing’s been finalised,” says Symons. “AFD doesn’t distribute ODFA products, but that is also something that’s been discussed.”
A quality focus
Realising the benefits of using organic milk in dairy products from a taste and quality perspective, the co-operative was keen to align itself with an artisan cheese maker who could showcase its organic milk in a gourmet, hand-crafted cheese.
Symons says the co-operative spoke to a number of cheese makers about a prospective joint venture, but wanted to find exactly the right partner. Enter third-generation French cheese maker Matthieu Megard, who moved to Australia five years ago and re-opened the old Timboon cheese factory before launching L’Artisan Cheese.
Megard’s family has been in the cheese industry for a century and also supplies cheese-making equipment. Symons says that Megard was really immediately interested in working with the co-operative, especially as he comes from Europe, where organic milk is far more prevalent. Such is Megard’s belief in the impact organic milk has on cheese that he is converting his entire range.
As well as his own products, he will create a line for ODFA, and the two lines will be co-branded as ‘L’Artisan Cheese made from organic milk from the Organic Dairy Farmers of Australia co-operative’ and ‘Organic Dairy Farmers of Australia cheese made by Matthieu Megard of L’Artisan Cheese’ respectively.
“Just as the quality of grapes and the types of grapes can impact on wine, we truly believe that the quality of milk is no different, and by putting our milk in the hands of someone like Matthieu, he can produce incredible products.”
The cheeses from the joint venture will be available in March or April this year.
In anticipation of strong growth, ODFA is actively looking to grow its supply base to ensure it is able to fulfil all future demand and has run a number of recruitment sessions in the last 12 months. As it begins to take greater control of its supply chain and increase volumes, ODFA clearly has another exciting decade ahead of it.
