MG responds to questions about Devondale

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After the publication of yesterday’s post, Murray Goulburn’s Robert Poole has this afternoon responded to Milk Maid Marian’s questions following the Financial Review’s commentary on Devondale’s sales performance. They are included here in full.

Q1: Are the figures quoted in the Financial Review a fair representation of Devondale’s sales performance?
A: MG considers that the data represented in the Rear Window opinion piece in the Australian Financial Review is selective and as a result has the potential to be misleading to readers. MG does not consider that it is a fair representation of Devondale.

Q2: To quote from the Fin Review: “According to Murray Goulburn, a big upside of the Coles deal was that it would ‘drive significant growth in sales for [its] core Devondale milk and cheese brands in the years ahead’”
A: MG has consistently stated that the underlying basis for the Coles contract was to enter the private label daily pasteurised milk market. This statement was made on 10 April 2013 when MG announced its entry into the landmark 10 year contract and again on 3 July 2014 when announcing the commencement of supply to Coles under that agreement. MG launching the Devondale branded daily pasteurised milk and Devondale Cheese into Coles (after a nine year absence) was separate to the underlying business case of supplying private label daily pasteurised milk to Coles. The supply of Devondale daily pasteurised milk and supply of Cheese was not the basis for entering into the Coles contract.

Q3 How do actual Devondale sales figures compare to the budgets set when the plants were planned?
A: Sales are in line with business plans.

Q4: Does Murray Goulburn continue to enjoy “preferred supplier status” with Woolworths?
MG does not comment on its relationship with customers.

Q5: How have the Devondale sales at Woolworths compare with those at Coles?
A: This information is commercially confidential. MG is proud to be a supplier to total Grocery and Foodservice trade, and works with all customers to grow the business and maximise returns to farmers

Q6: Does MG plan to review its product mix or marketing strategy in light of Devondale’s sales performance?
A: MG has a balanced portfolio across international and domestic markets, ingredients, Private label and branded products. Like any strong business, MG is managing this portfolio to maximise the returns to Farmers, as evidenced by the current farmgate price.

Q7: How does Devondale’s sales performance compare with other areas of MG’s business?
A: In 2014/15 Devondale is one of the leading growth and profit divisions for MG

8 thoughts on “MG responds to questions about Devondale

  1. Note: The Financial Review has countered MG’s claims of distorted figures by saying that the co-op has itself been misleading.

    The AFR argues that MG’s moving annual totals will of course look good because they are comparing this year’s sales with last year’s – and of course that was before MG has struck the deal with Coles.

    “So yes, Murray Goulburn is right that it has sold more product to Coles in 2014 than in 2013, but that has a lot to do with the fact that in 2013 it stocked almost no milk in Coles and only stocked cheese for six months out of 12.”, the AFR concludes.

  2. If I was a milk supplier to MG then the answers would not matter to me other than out of curiosity, so long as MG pays a timely and market (or greater) price for what I would be supplying them.

    If I was a shareholder I would probably be seeking a different set of questions around overall financial and market segment performance against plan and why can’t MG provide the performance dashboard on a quarterly basis.

    Given MG has a unique co-op type arrangement where supplier and shareholder are essentially one. Often the questions asked by some with a greater supplier focus can end up with an answer being distasteful to someone with a more shareholder focus, and vice versa. It is a tough balance to maintain especially in such a volatile market as dairy products are.

    MG need to look to putting a reporting framework together and deploying it to its shareholders and suppliers pronto to pre-empt this using data from other sources type journalism that just polarises views and destabilises MG to the extent it becomes a protective and rather uncommunicative entity that spirals the problem out of control.

    In defence of Mr. Helou, he has been hit by journo’s with less than positive views, rumours or sleight-of-writing with a greater frequency than any industry peer in the last 12 or so months. Whether we like it or not he is the CEO of our largest Australian owned dairy processor – give him a break and let him lead and measure him on the results. If the results fail to meet expectations then seek his removal but don’t boo and hiss him mid-flight of his efforts constantly trying to assassinate him as that just sets everyone up for failure – suppliers, shareholders and MG personnel alike.

    • Well, what an interesting series of points you make, Mr Magoo.

      The questions were selected to offer MG a chance to set the record straight. The AFR raised some important issues that go to the core of MG’s strategy for renewal. If the Devondale brand really is “tanking” in Coles, then its farmers need to know.

      At supplier-shareholder meetings, the board and management have consistently stressed that changing the product mix will allow MG to pay the best price and that the only way to do this successfully is with a partial listing of the co-op. It has also explained that it is able to maintain the $6kg/MS price in the face of falling global commodity prices without drawing down profits because of the success of this new product mix. If the new product mix is failing in one of the two big supermarkets then what?

      I agree with you that the war of personalities has to stop. It is worth remembering the source though and that the olive branch must come from MG. You don’t make friends in the media by trying to get them sacked or attacking their reputations. Nor can you afford to have a glass jaw if you’re going to make a habit of swinging punches.

      I can only hope the AFR report is dead wrong and that MG’s strategy is a winner.

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