For the last three decades, the King Island Dairy Company has had a new owner on average once every five years. It’s not an easy business.
The 132-year-old dairy, which sells its brie, camembert and cheddar to Coles and Woolworths, is on an island halfway between Tasmania and Victoria.
Now it has a new owner, former investment banker Nick Dobromilsky. The question is whether he and his business partner Graeme Wilson, who made his fortune manufacturing plastic food containers under the Decor brand, can succeed where King Island Dairy’s former owners have not.
Those former owners are serious businesses. King Island Dairy has been owned by Philippine giant San Miguel Food and Beverage, Japan’s Kirin and, most recently, Canadian dairy giant Saputo, which wanted to shut the company and was ultimately pushed to sell it by the Tasmanian government.
“If you are a big business conglomerate, why would you chase an extra $2 million in sales?” said Dobromilsky, who has previously worked at agribusiness dealmaking specialist Kidder Williams and at Credit Suisse.
King Island Dairy, he said, is something special.
“Because it’s near to the sea you never get a grass frost,” Dobromilsky said. “The quality of the cheese is still very highly regarded in this world of automated processing lines.”
While the global giants were attracted to King Island Dairy for the island’s clean, green credentials – it has a population of just 1700, and the dairy cows graze on pristine green pasture – their presence has been a sore spot for many in the local community. For one, they accuse former owners of failing to invest in the business, leaving it without a future.
Dobromilsky estimates King Island Dairy has been running at between 10 per cent and 20 per cent of capacity, and extra funding is needed to bring specialist equipment from Europe that will allow it to make softer cheeses, which he has identified as an opportunity for expansion.
Another element they need to overcome is the rising cost of freight.
Bass Island Line, owned by the Tasmanian government, ships produce to the mainland and diesel to the island, for energy company Hydro Tasmania to operate diesel generators when wind and solar are not producing enough power.
King Island mayor Marcus Blackie estimates the cost of shipping and air freight has doubled in the past 10 years. “We’re exposed more than anyone else. It’s an expensive undertaking.” He wants more government help for the island.
Dobromilsky acknowledges the rising freight costs, but said on the flipside it helps the brand’s mystique. “It’s one of the headwinds, but you also have a benefit from telling the story. It’s cheese from a pristine island.”
Dobromilsky was head of finance and treasury at Marlin Brands, a business that sells a range of products including Willow eskies, Decor food containers and Pacifico Optical sunglasses, for three years until 2022. Wilson has a long history of running successful businesses, and operates Garden City Plastics from headquarters in Melbourne’s outer suburb of Dandenong. It makes plastic pots for plants sold in nurseries.
The two met when Dobromilsky was working for Coast2Coast Capital and bought the Decor business from Wilson. “I was on the other side of the table,” Dobromilsky said.
Local businesses owners, such as Audrey Hamer, who has operated the King Island Bakehouse in the town of Currie on King Island for 40 years, are excited about the new ownership of the dairy group.
“They have got a lot of work in front of them, but I think it will be much better now,” Hamer said. She, too, raises concern about the extra costs of freight transport, which will need to be factored into turning King Island Dairy around. “The main issue is the cost of freight. It keeps going up and up.”
Phil Kennedy, a businessman who owns the Pure South restaurant in Melbourne’s Southbank precinct, which sources high-quality produce from Tasmania including cheese, lobster and beef from King Island, described the investment in King Island Dairy as a “breath of fresh air”.
He is a driving force behind a $35 million project to build 64 hotel rooms at the Ocean Dunes golf course, one of two 18-hole courses on the island.
The other top-flight golf course is Cape Wickham, a luxury course managed by Vietnamese tourism group Vinpearl, with rooms overlooking the links and the Cape Wickham lighthouse in the distance.
Tasmanian Premier Jeremy Rockliff has pledged a $10 million package in loan, payroll tax relief and stamp duty exemptions over the next decade to King Island Dairy’s new owners.
“Graeme and Nick are salt of the earth people who have a genuine desire to invest in the dairy and grow the brand,” Rockliff said.
Dobromilsky and Wilson won’t talk about the purchase price. In 2002, King Island Dairy Co was acquired by the-then ASX-listed National Foods, in a $92 million buyout.
It generated $10 million in earnings before interest and tax in 2003-04.
Dobromilsky and Wilson believe they have the right recipe this time.
You can now read the most important #news on #eDairyNews #Whatsapp channels!!!
🇺🇸 eDairy News INGLÊS: https://whatsapp.com/channel/0029VaKsjzGDTkJyIN6hcP1K
