Anindita Chatterjee
Updated on: October 11, 2024 5:23 pm GMT
In a decision that has sent shockwaves through Tasmania, Saputo, the Canadian dairy giant, announced the impending closure of King Island Dairy, a beloved brand with over a century of history. The business, which employs nearly 60 people directly and supports many more through its supply chain, is set to shut down by mid-2025 after Saputo failed to find a buyer. This closure raises concerns about the economic stability of King Island, a community with a population of approximately 1,700, already grappling with difficult conditions due to extreme drought.
Background on King Island Dairy
King Island Dairy, established over 120 years ago, has been a staple in the national cheese market, with its products widely available in major Australian supermarkets. The brand has built a reputation for quality cheese produced in a unique geographical setting in the Bass Strait. However, despite its strong local presence, King Island Dairy has faced increasing challenges in a competitive and changing market landscape.
Saputo acquired King Island Dairy in 2019, hoping to integrate it into its portfolio of Australian dairy brands, which includes well-known labels like Devondale and Cracker Barrel. However, the new ownership struggled to help the business thrive within what has been characterized as an “ultra-competitive market.” Leanne Cutts, Saputo’s President and Chief Operating Officer for International and Europe, confirmed the closure decision, citing the need to strengthen the competitiveness of their Australian operations amid shifting industry dynamics.
Economic Impact on the Local Community
The impending closure is expected to have a profound impact on the local economy, according to King Island deputy mayor Vernon Philby. “It affects all services. The fewer employees we have on the island means that shops will likely employ fewer staff,” Philby expressed, highlighting the potential for a domino effect throughout the community’s economic structure.
As the island faces what has been described as the worst drought in a century, the news of the closure is particularly disheartening for residents. Local authorities have indicated that the government is working on providing immediate support to those affected, including the workers at King Island Dairy, local farmers, and the wider community.
Challenges Faced by King Island Dairy
Industry experts have pointed out several factors that contributed to the decline of King Island Dairy. One significant issue has been its inability to compete in a market dominated by larger players capable of scaling their operations. Rob Wooley, founder of TasFoods, noted that the company’s strategy did not align with the industrial-scale focus pursued by Saputo. This mismatch likely diminished King Island Dairy’s chances of competing effectively.
The economic pressures on regional manufacturers, exacerbated by the rising cost of living and increasing operational expenses, have forced consumers to shift away from premium products. Tanya Barden, CEO of the Australian Food and Grocery Council, emphasized the impact of these changing consumer habits on businesses like King Island Dairy. “Manufacturers are getting squeezed from both ends, losing demand and facing higher cost pressures,” she stated.
Reactions from the Dairy Community
Local cheesemakers and industry stakeholders have expressed their disbelief over the closure and the lost opportunities for a brand with such a rich heritage. Nick Haddow, a prominent cheesemaker from Bruny Island, criticized the marketing strategy employed by Saputo, suggesting that relying heavily on major supermarket chains like Coles and Woolworths hindered the brand’s growth potential. “Producing cheese on an island in the Bass Strait is always going to be a tough sell,” Haddow remarked, emphasizing the need for a different marketing approach focused on the brand’s quality and heritage.
Many in the dairy community are hopeful that a new owner might emerge, one willing to invest in the brand and adopt a more boutique focus. TasFarmers president Ian Sauer stated that it is essential for Saputo to exhibit corporate responsibility, particularly in transitioning local farmers to new enterprises if the dairy does close.
The Future of King Island Dairy
The future of King Island Dairy remains uncertain. While Saputo has confirmed its commitment to close the operation, industry officials, local farmers, and residents are still advocating for a buyer that values the brand’s legacy and is committed to maintaining its operations.
There is a shared optimism that a future buyer could leverage the unique qualities of King Island Dairy to revitalize the brand. By concentrating on super-premium products tailored to niche markets, it is believed that a new business model could breathe new life into this iconic dairy.
As the community braces for the impending shutdown, the efforts of local leaders and businesses will be critical in mitigating the anticipated impacts and preserving the cultural and economic identity of King Island.
In the next few months, we will work hard to help the workers who have been affected. We will also look for new chances to grow King Island Dairy. Our goal is to respect its rich history while also changing with the times in the dairy industry.
