Oz processor tipped to be broken up

Kirin Holdings, of Japan, is indicating it may sell the dairy division of Lion, its Australian food and beverage subsidiary. 

Lion Dairy is a significant player in fresh milk markets in Queensland, NSW and Western Australia. Collecting about 10% of the national milk, it owns prominent brands Pura and Dairy Farmers fresh milk, Yoplait and Dairy Farmers yoghurt and the specialty cheese brand Tasmanian Heritage.

Australian dairy analyst Steve Spencer, of FreshAgenda, believes a break-up of the business is likely.

“It has effectively been for sale for several years. A breakup is probably more realistic, as flavoured milk and specialty cheese would be of interest to a few players, but the fresh white milk business is not especially attractive to others,” he told Dairy News.

Lion Dairy is not expected to end up owned by either of the two top Australian processors -- Saputo and Fonterra. 

“Neither is likely to make more major investments in this country until existing assets improve and demonstrate profitability,” Spencer says.

Kirin is reviewing its Lion Dairy & Drinks division in Oceania. 

It would consider selling the unit, which produces and distributes its dairy, soft drinks and juice brands in the region.

“Lion Dairy & Drinks has restructured itself and improved its profitability since 2015 through the ‘Turnaround Project’ launched in 2014, and the ‘Kirin Group 2016-2018 Medium-Term Business Plan’,” Kirin said.

“Having improved its business performance… it is appropriate now to consider the best pathway forward to maximise sustainable growth potential for the future.”

All options are being kept open, Kirin said, including an all-out sale. No decision had been made.

Kirin first entered Australia’s dairy sector in 2007 when it bought the local manufacturer National Foods for A$2.8bn; Fonterra, which owned a 19% stake in National Foods in 2007, lost the bidding war to Kirin.

A year later Kirin moved to buy another Australian dairy business, Dairy Farmers, for A$910m.

In 2009, Kirin snapped up the Australian beverage business Lion Nathan and merged these new assets with National Foods. 

Two years later, Kirin renamed the overall Australian arm Lion.

In 2015 the Canadian dairy giant Saputo bought Lion’s ‘everyday’ cheese business for A$137.5m, taking control of the Coon, Cracker Barrel, Mil Lel and Fred Walker brands. Lion retained the ‘specialty’ cheese brands South Cape and King Island Dairy.