Dairy producer and Vegemite owner Bega Cheese has warned of elevated milk prices for the foreseeable future given the highly competitive environment and high farm gate prices.
Through brands such as Dairy Farmers, Pura, Dare and Masters, Bega has a 52 per cent share of the nation’s milk-based beverages market, a 26 per cent share of the yoghurt market and a 12 per cent share of the fresh white milk category.
But it said milk prices for consumers would continue to be elevated given an industry-wide decline in production.
“Reduced milk availability and industry over capacity increasingly creates disconnect between farm gate milk price and commodity markets,” Bega noted on Thursday in reporting its full-year results, but it expects in future it will be less exposed to farm gate milk volumes and prices through restructuring of its business.
“What we want to do is make a business that is far more agile that has parts that can be that can be rested and has costs that can be pulled out. That will make us far more able to deal with farm gate price fluctuations and volumes,” Mr Findlay said, adding that the company was likely to face flat conditions in the 2024 financial year because of the continued tight milk market.
He added price increases had been done “in a very responsible way”
Bega chair Barry Irvin said there had been no “trade down” — consumers buying a cheaper product — in Vegemite given the strength of loyalty to that product.
Bega has pushed through another round of price hikes this financial year, but in the low single-digits, rather than double digit percentage as happened last year.
Bega reported an after-tax loss of $229.9 million, driven by a $230m after-tax asset impairment— a 606 per cent fall year-on-year which had been forewarned.
Bega, which has a milk and cream manufacturing base in Bentley, expects financial performance to be flat this financial year, but a “more positive” medium term outlook.
The centenary of the iconic Vegemite spread pushed sales up to twice the growth rate recorded for competitors, but peanut butter sales were lower, the company reported.
Chief executive Pete Findlay said the group now had four brands with at least 100 years of heritage, and all grew in volume and value of sales.
Bega shares were slightly higher to $3.23.