Local Australian brands struggling to survive the ‘scale game’ as shoppers cut costs.

About halfway along the east coast of King Island sits a beloved icon of this remote and rugged patch of land in the middle of the Bass Strait: King Island Dairy.

“It’s part of our DNA,” said Heidi Weitjens, president of the King Island chamber of commerce. “Even the King Island bakery has camembert cheese pies.”

The award-winning cheese manufacturer with century-long roots on the island will close in mid-2025, ending an Australian brand familiar to cheese-lovers nationwide.

The manufacturer’s owner, Saputo Australia, announced the closure on Thursday. The business had been under a cloud for 10 months after Saputo launched a strategic review of the facility.

King Island Dairy operations began in the early 1900s and is one of the biggest employers in the tiny outpost, home to about 1,600 people.

The island’s councillor, Sarina Laidler, said while many people would find other jobs, “we’ll lose some families”.

“That’s a concern given our population,” she says. “We’re a very proactive and strong community and we will move forward.”

Weitjens agreed that the closure would “reverberate” across the community.

“To service the dairy is a big operation,” she said. “There’s the tradies, contractors, subcontractors, buyers, providers.”

“We’re thinking of ways to help those people who’ll lose their job stay here.”

But Weitjens, who owns King Island Distillery, said the island had plenty of other drawcards, including art, a thriving food scene and the natural beauty of its “bare beaches”.

Leanne Cutts, Saputo’s chief operating officer, said the decision to wind up the business was difficult. She said “every possible option” had been reviewed but closure was the most viable way to strengthen Saputo’s competitiveness in a changing market.

“As King Island Dairy’s historic roots are deeply embedded in the region, it was hoped the strategic review would identify a potential buyer for the facility,” Cutts said.

“Our other Tasmanian brands such as Mersey Valley and Tasmanian Heritage are thriving.”

She acknowledged that King Island Dairy products are “nostalgic” for many Australians, but said

the brand had “not maintained its position in today’s ultra-competitive food industry”.

Saputo, which bought King Island Dairy in 2019, said 58 employees would be affected but “redeployment opportunities” would be sought . Cutts said Saputo would work with dairy farmers and the island’s broader community.

Retail expert Brian Walker said Australian products are struggling under the pressure of increased costs in distribution and manufacturing. Meanwhile, he said, customers have become more cost-conscious.

“We might not technically be in a recession, but for many consumers we are,” Walker said.

“Supermarkets are pushing back on their buying and supply channel arrangements to obtain the biggest margin to be cost-competitive.”

He said survival of brands is a “scale game” which can present a problem for local products.

“One of the drivers is we have comparatively high labor rates, so all these costs of doing business in our country are getting increasingly higher than international competitors who have scale,” he said.

He also said brands are competing against an increased number of phantom brands – products manufactured by supermarkets but with “little” branding to indicate they are supermarket-owned.

The dairy’s closure follows those of other Australian retailers including confectionary company Sara Lee, which went into voluntary administration last year, and vacuum cleaner retailer Godfreys, which collapsed in January after 93 years.

In 2021, Nestlé closed its dairy factory in Victoria’s Tongala, but earlier this year it reopened after the site was brought by a new brand.

The Tasmanian premier, Jeremy Rockliff, called Saputo’s decision disappointing.

He said the state government was prepared to work with the company in a further effort to find a new operator.

“We are providing immediate support to the company’s workers, farmers and the wider island community,” he said.

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