The executive chairman of Bega Group says it is on the right path by tilting its business further towards branded pantry products such as Vegemite and Dare iced coffee, in a bid to restore its fortunes after the share price halved in two years.

Barry Irvin said a shortage of milk produced in Australia had dented profit margins as industry players scrambled for the limited supply from farm gates at a time when global dairy commodity prices were tumbling.

“It gives nobody any pleasure to see the share price where it is,” Mr Irvin said at the group’s annual meeting on Tuesday. Bega shares were above $6 in June 2021 but are now sitting below $3.

But the Vegemite brand, which Bega acquired in 2017 for $460 million from global food giant Mondelez International, had one of its best years in two decades. Vegemite is celebrating its 100th anniversary this year, which helped increase growth by almost twice the rate of the broader $700 million spreads category. That category alone grew 5 per cent in 2022-23.

Bega chief executive Pete Findlay said Vegemite’s annual volumes in 2022-23 had increased for only the second time in the past 20 years.

He said the historic brands in the company’s stable, which also include Farmers Union iced coffee, Dairy Farmers and Bega cheese, were more than 100 years old and had all increased volume and value.

The branded business would “counter the headwinds” facing the commodity business in 2023-24 somewhat, but the group overall was still expecting normalised earnings before interest, tax, depreciation and amortisation to be “relatively flat” at between $160 million and $170 million.

Short shrift for short sellers

Mr Irvin was highly critical of the practice of short selling in financial markets, and said it handicapped companies such as Bega, which were building long-term growth businesses.

In response to a shareholder question, he said between 4.5 per cent and 5 per cent of Bega shares were being shorted, but it had been higher in the past.

“I’d probably agree with the shareholder [that it should be banned], but I am not a regulator,” Mr Irvin said.

Some ASX lithium miners such as Pilbara Minerals have about 13 per cent of their shares held by hedge funds.

Bega is trying to shield itself from the volatility of global dairy commodity prices by shifting further towards branded products. Such products made up 85 per cent of revenue in 2022-23, compared with 73 per cent two years earlier.

Bega booked a $276 million impairment on its dairy factories and infrastructure because it does not think conditions will improve in that part of the business.

Global dairy prices for products such as skim milk powder have declined about 30 per cent. But the farmgate prices Bega had to pay dairy farmers to secure milk supplies for its branded products were rising because of the scarcity of milk.

Australia’s milk production has shrunk to about 8 billion litres from about 11.5 billion litres in the past 20 years, the company says.