WITH four consecutive years of record financial results under its belt, northern NSW dairy co-operative Norco has just bought back the licensing rights for its iconic brands.
The move opens the door for its milk to be sold anywhere in Australia – or around the world.
Against a backdrop of foreign dairy acquisitions and declining branded fresh milk sales courtesy of the $1-a-litre supermarket war, farmer-owned Norco, based at Lismore, NSW, is also launching new products and paying some of the highest farmgate milk prices.
It also plans capital investments to the tune of more than $9 million this financial year.
Five years ago, with its finances squeezed and extensive processing rationalisation occurring across the dairy industry, Norco sold its milk marketing, sales and distribution business to New Zealand dairy giant Fonterra.
Under the deal, Norco remained Fonterra’s preferred supplier.
This month it has taken back that “front-end” business, including all 64 employees at its plants at Labrador, in South East Queensland, and Raleigh on the Mid North Coast.
Norco’s chief executive officer Brett Kelly said the relationship with Fonterra had been successful but the co-operative’s members wanted complete control over the entire Norco supply chain.
Fonterra, also farmer-owned and the largest milk processor in the world, has moved away from the fresh milk market and become more of an ingredient supplier in recent years.
It has 10 manufacturing sites in Australia and markets brands like Mainland, Bega, Nestle’s Ski and Western Star.
The 117-year-old Norco, now a diversified agribusiness with rural stores and a stockfeed and pet-food division, posted an $11.77 million EBITDA (earnings before interest, tax, depreciation and amortisation) for the 2011-12 financial year.
The result was up 10.6 per cent on the previous year which itself was a record.
Sales volumes of Norco fresh milk have generally defied the trend towards cheap supermarket generic brands, slipping less than 1pc in the past year.
That result was against all expectations and testament to just how much loyalty the Norco brand now attracts in its markets.
Chairman Greg McNamara, who farms near Lismore, said recognition of the contribution that co-operatives make to regional economies and communities went a long way to explaining consumer support for Norco’s brands.
“Everyone knows someone who works in the factory or on a farm,” he said.
“That level of connection is much deeper than in the city.”
Norco’s revived financial performance has allowed for an average milk price of 52.71 cents per litre to be paid to its 162 supplying farms from Kilcoy in Queensland to Dungog in the Hunter Valley.
The payment is up slightly on the previous year and at the very top end of processor payments to NSW dairy farmers.
Its total milk intake last year was 148.7 million litres, with Mr McNamara saying there was less need to buy in milk from other sources in the past year due to increased production on the back of better seasonal conditions.
The average Norco farm now supplies 923,000 litres a year – up from 851,000 litres during the previous year.
While the co-operative’s commercially sensitive plans for targeting new markets are being kept under wraps, Mr McNamara said this financial year was shaping up to be a “milestone year in the history of Norco”.
“There is a demonstrated consumer loyalty to regional brands and new-found interest in a coop that adds value to its members’ milk,” he said.
“Coupled with our capital investment program, that should see exciting strategies come to fruition in the near future.”
Support at Goolmangar
New labelling on Norco fresh milk products highlighting their permeate-free status and the fact the business is farmer owned will go a long way to building market share, says producer Darryl Rose.
With his wife Coral, son Dennis and his wife Serena, Mr Rose milks a mixed herd of 160 at Avonmore, Goolmangar, NSW, sending about a million litres of milk to Norco a year.
The family farm has been supplying Norco for 32 years.
Darryl Rose said when the $1- a-litre supermarket milk furore hit the headlines last year, plenty of people in his community asked him directly about the difference between generic retail brands and Norco milk.
“When I explained we have always been permeate-free, we have been around forever and that by buying Norco they would be supporting local farmers and workers and keeping money in their own region, there was no question about what milk they’d buy,” he said.
About 130 millimetres of rain in early November followed by follow-up falls in the past two weeks have turned the season around for the Roses, whose production was down 20 per cent this spring due to the dry spell.
“We’d exhausted our conserved feed supplies and were buying in hay before the rain arrived,” Mr Rose said.
“It’s kicked pastures along beautifully.”