Western Australian producer, Brownes Dairy, has been put up for sale according to the Australian Financial Review (AFR), as one of its biggest lenders, China Mengniu Dairy, calls in its $200 million loan. A reduced demand for milk in China and the current positioning of the global market could be driving the decision.
Brownes manufacturers Brownes- and Chill-branded white and flavoured milk, yoghurt, creams, custards, dairy desserts, juices and cheese. The company Brownes has two main processing plant locations in Western Australia, located at Balcatta, near Perth, and Brunswick Junction, further south.
It was previously owned by Fonterra, then acquired by private equity firm Archer Capital in 2011, before being sold to a consortium of investors led by Shanghai Ground Food Tech in 2017.
Shanghai Ground Food Tech is an established dairy company publicly listed on the Shanghai Stock Exchange, and its Chinese dairy operations focus on liquid milk and cheese products. It is partially owned by China Mengniu Dairy, one of the world’s largest dairy companies, and the company that lent $200 million to Australian Zhiran, Brownes’ parent company.
According to the AFR, a Mengniu subsidiary appointed McGrathNicol’s Keith Crawford to sell Brownes.
“As our appointment is limited to holding company shares only, we do not anticipate any impact on day-to-day operations.”
Mengniu had previously attempted to purchase Lion’s Dairy & Drinks business in November 2019, worth $600 million, before the deal fell through, with both parties walking away due to approval from the Foreign Investment Review Board (FIRB) being “unlikely”.
China has increased its milk production by nine million metric tons over the past decade, and is the world’s largest dairy importer. However, agribusiness banking specialist Rabobank reported in its global dairy report last year that it expected demand for milk to decline in China, with domestic milk production forecast to decline by 0.5 per cent year on year in 2025, as economic pressure on farms mount in the face of tumbling Chinese farmgate milk prices.
The economic fallout from global tariffs may also be impacting companies’ decisions to withdraw from international investments, and refocus on domestic production. This is something that is definitely being seen in Australia, with tech startup, Fair Supply, predicting the combined direct and indirect costs of new and reciprocal tariffs could cost the Australian economy more than $15 billion, and the latest food supply chain report from the Australian Food & Grocery Council showed companies are working to onshore manufacturing processes.
Business for Brownes is expected to continue undisturbed, led by CEO Natalie Sarich-Dayton, who has been leading the company since 2021.
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