This is Part II of The Shaker's interview with David Tyack. To read Part I, click here

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What makes you passionate about the Fast-Moving Goods (FMG) market? Logisitics, Sales? Marketing? In this segment, there are unusually high pressures push through inventory and compete on price.

For me, the passion comes through identifying the strengths of the business and using those to leverage the product.

For Canberra Milk the strength is obvious – Canberrans just love the brand. We’re immensely proud of what it represents.  CCFA is determined to have Canberra Milk stick around for decades despite everything that is thrown at it by the big supermarket players.

But make no mistake, the pressures are real. This is the smallest operating milk production plant in Australia, and for us to sustain that local service we absolutely must find other revenue streams.

But we have a plan and its implementation is starting to work. My priority is to ensure we can write the next chapter of the story for Canberra milk to ensure that money, and the jobs it represents stays within the local economy.

The Canberra Times ran a story on the most trusted local brands. We were beaten into the top position by Club Lime.

 

 

Really..? I would never have picked that.

Look, being second is great, but I think it demonstrates that perhaps our brand had retreated somewhat into the background of Canberra -  like we’re as ever-present as the wallpaper and therefore bear little consideration.

It’s important that we change that perception and that Canberra Milk appears innovative and exciting. Our brand diversification strategy aims to drive that change in the way Canberra Milk is viewed.

We’ve released a new campaign to start reinforcing this.

 

Sponsoring national sporting teams is more the domain of alcohol brands – and Lion certainly has plenty of those. Why did the company decide to push so much promotion of its milk products?

We were on the Brumbies last year (when they had a hole to fill) and for The Raiders we have Dare on the sleeves and Canberra Milk as well as Dare on the goalpost padding.

We just want to support and celebrate Canberra at a local level. By sponsoring elite sporting teams – but also Floriade and a whole range of community services -  we’re reminding people of the role we play within the city.

But it also helps us secure our social license to operate. We can’t trade off the Canberra name without supporting the activities of the people who live here. As just one example, we give free milk to schools across Canberra so that kids whose families can’t afford breakfast have something to eat at the start of the day.

 

Canberra Milk is in an unusual position. There is incredible brand loyalty - 20 years ago, Woolworths dumped Canberra Milk for Pura Milk and there was rioting in the streets! 

We still face a great threat from grocery. There is no doubt that when consumers are faced with the option of cheap milk from Coles or Woolies – as they have since – that some of that market is going to drift away from us.

However, there is still plenty of home-town pride outside of grocery. When people pop into their local café it is clear they prefer Canberra Milk to be used in their coffee. Similarly, those popping into a smaller store for a litre of milk on the way home are showing great loyalty to the brand.

 

Milk is a highly-exportable commodity, and the agriculture boom threatens the availability of produce for domestic consumption…

So long as we predominantly supply a domestic market, we’ll be at the behest of what the export market does. For example, when the world commodity prices spike – be it for whole milk, powder or cheese, the major processors (Murray Goulburn (MG) and Fonterra) put a huge pressure on the domestic spot price.

As a result, we don’t get any of the gains of the international demand for milk products, but are stuck with the higher costs. On top of that, we don’t believe that clawing back payments from suppliers – as the main producers are under fire for doing – is a particularly moral act, so we’ve maintained our price to farmers throughout.

That’s a cost to the business but one that we feel is important. We lost some money in the short term, but it if you look at the reputational costs incurred by MG and Fonterra, I think we’re in a pretty good place.

 

 

Is the decision to maintain farm-gate prices made at Lion/Bega Cheese level, or can CCFA make that strategic call independently?

The CCFA board took the advice on potential impacts and made the decision. The long-term strategy of both Lion and Bega is taken into account, as well as how long the local arm (CCFA) can sustain that price impact.

We all feel really proud of that decision, and truly believe that a sustainable farm-gate price reflects the values of the company and its place in the community.

 

…and you believe that plays in your favour in the market?

Canberra Milk is a premium product. You’ll see some smaller grocery stores selling your product for almost $2.00 per litre and some consumers perceive that there is no difference between us and cheap milk.

But that premium perception allows us to absorb costs such as the higher cost of milk from our farmers, and the cost of production in a small facility. However, we can’t exploit that perception too far, so we’re always very careful to balance the sustainability of the business with what the customers will pay.

That will continue to remain the challenge for Canberra Milk.

It’s vital to remember that there are big companies investing a significant amount into the Canberra Milk brand. As a custodian of that brand, I’m really passionate to ensure that their commitment to the city remains viable and, as such, ongoing.

 

[Capitol Chilled Foods (Australia)]