The Interview: David Tyack from Capitol Chilled Foods (Australia)
There are few brands in Canberra that are more recognisable than Canberra Milk. Local passion for the product runs deep, but the challenges within the milk industry – and the broader Fast-Moving Consumer Goods (FMCG) sector – cannot be understated.
Almost 10 years ago, international beverage company Lion purchased a controlling stake in Capitol Chilled Foods Australia (CCFA). What resulted was a huge commercial and cultural shift that was largely devised and implemented by then General Manager David Tyack.
Now the Managing Director of CCFA, David has extensive experience in FMCG and various beverage sectors. As a new arrival in Canberra, The Shaker was interested to see how David matches the demands of a huge parent company with a local Canberra brand.
Many people wouldn’t understand the structure of Capitol Chilled Foods and where Canberra Milk fits. Can you walk us through it?
Sure. The business of Canberra Milk and Capitol Chilled Foods has been here in various guises for the last 45 years. It was an alliance back then between Dairy Farmers and Bega Cheese.
Originally, Dairy Farmers had the processing plant on the corner at Wentworth Avenue in the heritage building, and Bega Cheese had the distribution arm operated out of here (closer to Fyshwick Markets). Given the size of Canberra at the time, it made sense to form a partnership, and that led to the creation of Capitol Chilled Foods.
Canberra Milk is something different. Until the early 2000s, the milk industry in Canberra was owned and controlled by the Government (under the ACT Milk Authority). There was a political decision to issue the licence for production of Canberra Milk to a private company, and Capitol Chilled Foods (Australia) (CCFA) was the successful bidder.
We still pay a license to the ACT Government to use that license. Alongside a couple of football teams, Canberra Milk is one of the city’s most recognisable brands.
For Lion, this is an important beverage business. From these premises we produce Canberra Milk, we make Dairy Farmers milk for the South Coast and Riverina regions, and bring in a lot of other brands from the two current owners, Bega and Lion. Currently, Dare Iced Coffee is our big push.
Finally, we act as a distributor for a whole range of brands such as Bundaberg Ginger Beer, Don KR Smallgoods, herbs and spices… the list goes on. These businesses use our distribution network and access to market to gain traction in Canberra without having to set up their own systems.
Lion shows a certain dexterity to bring their global way of thinking into what is a pretty local market…
Absolutely, but there is great business for Lion here in Canberra. Also, don’t forget that Bega Cheese is a big entity in itself…
True! The romantic idea of cheese being made in a cute little factory on the South Coast is long-gone.
Bega Cheese is an ASX200 company these day (2015/16 revenues were $1.1 billion). If you want to understand just how big it is, remember that they recently purchased Vegemite among other brands as part of a $460 million deal with Kraft.
Things have certainly changed in the production facilities at Capitol Chilled Foods…
They have. Historically, this facility was anchored in producing white milk for the regional market. That still plays a major part, but we’ve faced a few challenges recently – mostly because of the discounting of milk by the major supermarkets.
This squeeze meant that there was little capacity to upgrade the production facilities and move our business into the modern era. When I joined the business late in 2015, I found that a lot of the milk processing equipment hadn’t been invested in and hadn’t been upgraded.
One of the most degraded parts was the carton line – a part of the business that Canberrans are quite passionate about. it was in such poor condition and creating so many quality issues that it was a better decision to start from scratch than try to bring the existing facilities up to standard.
We replaced the entire packaging line for all sizes up to one litre. As part of that, we gave the brand a minor update by switching from cartons to bottles. Now, all of Canberra Milk’s products come in clear PET. It’s easier to reseal the product, and easier to see how much is left in the bottle.
That’s the end of the first part of the upgrade. We’re almost ready to upgrade our two- and three-litre bottling lines which are well overdue. What we’ll put in place are faster fillers that means we can get fresher milk to market more quickly. That will set up the business for the next decade and beyond.
What have you brought to the table with fresh eyes and your experience with Coca Cola, Lion, and your consultancy?
This business has been on an interesting journey. They had not really moved on since the industry was deregulated. Before 2000, the farm gate price was set by government and the retail price was set by government, and nobody else was allowed into the market. That was a great place for CCFA to operate – Canberra Milk was the only option.
When I arrived in 2015 there were declining volumes – due to heated competition – declining profitability and declining production assets.
I decided to change the focus from white milk to other products. We still love Canberra Milk – that will never change - but we needed to spread our risk and seek out growth in other lines.
Dare and Moove are major parts of that. Juices are the next tier, and we’re giving a big push to bottled water. In those impulse purchase lines there is greater growth available with higher profit margins and, importantly, the potential to secure profitability is greatly enhanced.