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Friday 20 May 2022

A closer look: Synlait shutters Talbot Forest factory for two years

28th September 2021 By Bridget O'Connell | bridget@foodticker.co.nz | @foodtickernz

Synlait is temporarily shuttering its Talbot Forest Cheese factory just two years after it paid an estimated $30m – $40m for the Temuka-based speciality cheese business.

In announcing its annual results yesterday, the Dunsandel-headquartered company said its Dairyworks consumer food division had underperformed due to TFC operating at a “significant loss”.

Talbot Forest Cheese to undergo brand redesign

It planned to close the factory for two years before bringing it back profitably in 2024.

“Dairyworks has underperformed in the last 12 months for a specific reason,” interim chief executive John Penno said.

“That is that our Talbot Forest Cheese has not been operating profitably. It has been operating at a significant loss.

“We have made the choice to close that factory for two years while we go through some changes that we need to make to bring it back in profitably, involving recovery of whey here at the Dunsandel plant, so we are making a significant cost saving in the next two years and then we expect to bring it back to production in a profitable way.”

Synlait’s annual report added that over the next two years an investment would be made to standardise cheese milk for delivery to TFC. Whey and lactose would be removed from milk to reduce yield losses, enabling cheese manufacturing to reach commercial levels again from the start of FY24.

A Synlait spokesperson said there were currently 12 people employed at the TFC factory, but did not confirm if they would remain with the group. It is understood there were previously around 100 people employed at the site, but a round of redundancies had already taken place this year.

She added that speciality cheese such as gouda and mozzarella for retail and foodservice customers under the eponymous brand would continue to be manufactured. The brand would undergo a redesign ahead of a planned relaunch.

In a diversification drive, Synlait bought Dairyworks for $112m in early 2019, followed later that year by the TFC acquisition, which comprised of the Temuka property, plant and equipment as well as the consumer cheese brand. TFC now sits within the Dairyworks consumer food business.

Synlait’s ambition is for Dairyworks to become the second biggest player in New Zealand’s consumer dairy food category, and the business is currently transitioning from being a cheese manufacturer to dairy having expanded its product portfolio to include butter and yoghurt products.

In the annual results to the end of July – its first full year of contributions – Dairyworks’ EBITDA “was lower than anticipated” at $10.3m. Synlait as a whole fell to a full year loss of $28.5m.

The group announced a restructure as part of its strategy to climb out of the red, including more emphasis on its liquids division which is focused on developing a high-value, future-focused product suite ultimately aimed at the maturing China market and Australia and New Zealand.

New liquids division products

As part of plans for its liquids division, the dairy company would launch its first consumer food product under the Synlait brand with the rollout of Swappa Bottle milk in Food Stuffs South Island next month.

It has developed a 1.5 litre reusable, stainless steel bottle for the homogenised milk which will be sold in South Island New World stores, with plans to widen distribution over time.

Other innovations in its 2022 pipeline included a UHT whipping cream, about which it is currently in negotiations with a distributor for the Chinese market, and an ambient drinking yoghurt which is undergoing trials for commercialisation in China, with a FY23 launch targeted.

More details on how the Swappa Bottle milk scheme will work are expected when the product launches on October 4, but Penno said “all going to plan, we expect to roll this out as a high-margin product.”

“It is a product that has a very low environmental footprint, with a container that is become the benchmark in terms of food quality in stainless steel and one that we see having a very long shelf life backed by big social media marketing programme when people can watch the life of the bottle and how many times it is being returned.”

Penno added that the liquids division – and the China market specifically – was an area where new chief executive Grant Watson would “bring a huge depth of experience in terms of developing that high potential opportunity”.

 

 


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