It's an impressive story of business expansion: Australian Consolidated Milk (ACM) started out with one dairy farm in Victoria and is now exporting to Asia.
Direct delivery to customers at home and overseas
In just over 10 years, Australian Consolidated Milk, opens in new window (ACM) has grown from a single dairy farm in Kyabram, Northern Victoria, into an international operation.
"We now operate by collecting milk from trusted suppliers and delivering dairy ingredients directly to end-user customers in the domestic and export markets," says managing director Michael Auld. “Our main export markets are China and south-east Asia."
A focus on growth
From the outset, ACM's goal was to grow a sustainable business.
"The year after purchasing our first farm we launched a milk management company to acquire milk from other dairy farmers," Auld says. "We now have more than 100 farmers supplying over 250 million litres a year."
At the same time, ACM was purchasing other farms in the area.
“We acquired these with a view to becoming self-sufficient,” Auld says. “We were also able to lease these farms to people wanting to get a start in the industry. Our aim is for young dairy farmers to build equity and eventually own the farm.”
ACM is also committed to supporting the dairy industry.
“We're concerned that commodity market volatility damages the confidence of dairy farmers and dairy customers,” Auld says. “Our aim is to operate a direct-to-market model in the premium value-added space rather than being a commodity player. We believe this will improve confidence by providing more stability."
This involves identifying high-value niche market opportunities, targeting supply chain efficiencies and keeping overheads low." Our strategy keeps us in a good position to support our existing suppliers and attract new ones," Auld says.
Starting a business abroad
A key ingredient of ACM’s success is choosing the right partners. As part of their international business expansion strategy they identified local experts with enough capital to support and promote the brands in market. They also embarked on trade missions with the Victorian Government and visited potential customers many times.
"Our investment in a joint venture with a UHT plant meant we were well placed to participate in Asian markets," Auld says. "We now have a state-of-the-art, fully-accredited UHT production facility in Shepparton, Victoria, which utilises the latest cutting-edge technology to produce a wide range of nutritious, quality dairy products in a range of formats. Our quality management system ensures that our products are compliant with the most stringent international regulatory requirements.”
A competitive environment
Auld describes the dairy industry as a very competitive landscape with many challenges.
“The biggest is product differentiation," he says. "It's also hard to explain the price differences that result when some countries actively subsidise their exporters. Another challenge is balancing competitive pricing with the high quality of our products. Sometimes, market forces drive prices down.”
Ultimately, Auld believes that ACM’s success lies in the strength of its business model.
“We’re transparent in our pricing to farmer suppliers and our payments to farmers are consistently at the high end of the scale,” he explains. “We’re also very flexible and accommodating with our customers.”
Good communication is another priority.
“The industry is very people-oriented and most of our leads are word of mouth so it’s vital we stay in touch with both suppliers and customers,” Auld says. “We have face-to-face meetings and publish regular newsletters, and our online communications include our website, Facebook and a Twitter feed.”
The importance of research
Auld advises anyone thinking of entering the dairy industry to do careful research.
“You must have a thorough understanding of how the industry operates, the risks involved and how they might be mitigated,” he says.
He adds that research is also vital for anyone planning to build an overseas business.
“You need to ask yourself whether your product must be sold fresh or can be stored, the size of your export market and whether you can guarantee supply,” he says. “You need to know which countries have a free trade agreement with Australia, if there are technical trade barriers and if you'll be trading in Australian dollars or other currencies. You also need to think about your supply chain and whether you’d be better off finding empathetic distributors to handle your product than going it alone.”
Learning about international and foreign exchange solutions could also be helpful.
A supportive banking partner
Like most businesses, ACM has needed different facilities at different times.
"These have ranged from mortgage lending to debtor finance and trade finance – and NAB has supported us all the way,” Auld says. “NAB has a clear understanding of agriculture and our business so we’re able to get things done relatively quickly. This is a big advantage.”
If you're growing your business, you can read more about NAB's business loans and finance options.
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The information contained in this article is correct as of July 2018 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.