Brownes Dairy latest play in Aussie dairy

Much of the Australian dairy industry and dairy farming is in foreign hands, often, but not always, Chinese hands.

The fact that the almost 140-year-old Brownes Dairy is now for sale, and who knows in whose hands it will end up, adds to the already existing uncertainty. Fonterra also wants to sell its Australian activities, or place them in a separate listed branch. In Tasmania, several companies have also changed hands in the past year. In addition, Saputo and Lactalis are committed to reducing the costs of their Australian dairy activities, including by closing factories and lowering milk prices. Fonterra did the same last year. 

The Australian dairy farming and dairy sector has been shrinking for years - from 11 to 12 billion kilos around 2000 to just over 8,7 billion kilos last year. Climate plays a role and with that also the production costs, but also the structure of the sector. 

Over the past decade, an increasing share of the dairy sector has ended up in foreign hands. The largest dairy company is the originally Canadian Saputo, which still processes almost 2 billion kilos of milk. Bega, one of the few truly Australian companies left, is close behind with around 1,7 billion kilos of milk. Lactalis reportedly processes almost a billion kilos and Fonterra, according to its own statement, around 830 million kilos. Together, these big four control between 60% and 65% of the total milk pool. A number of smaller companies have ended up in Chinese hands. Brownes Dairy, which has an annual turnover of around AU $300 million, is also in this category. Since 2020, Mengniu Dairy has been in charge, as it does at infant nutrition producer Bellamy's. 

Many Australian dairy farmers hope that Brownes Dairy will soon end up in Australian hands again, but that does not seem likely at first glance. Before 2017, it was owned by a venture capital firm in Sydney. That sold the company to Shanghai Ground Food Tech, through which it largely ended up with Mengniu.

Mengniu has been struggling recently and has been under pressure to repay creditors. This seems to be the reason why it called in a AU$200 million loan to Brownes early. The company, which claims to be doing well, was taken by surprise and now says it has no choice but to put itself up for sale.

The New Zealand dairy producer wants to decide the fate of Fonterra Australia later this year. In the meantime, farmers in Tasmania are also waiting to see who they will be delivering their milk to by the end of this year, and whether they will still be able to deliver milk. A number of wealthy Chinese also largely control the processing industry there, but they are also working to limit losses and reorganize their activities.