December 30, 2011

Foundations of business success

What’s the key to long-term business growth? Warrnambool Cheese and Butter Factory explain how they’ve adapted to keep going strong for over 120 years.

Australian-owned Warrnambool Cheese and Butter Factory (WCB) is the oldest dairy processor nationally. Since opening for business 123 years ago, listing on the Australian Stock Exchange in 2004 and now employing some 450 staff, WCB in Victoria’s south-west has overcome ups and downs by adapting to market changes, seasonal conditions and customer requirements. All the time, they’ve never lost sight of the core underlying competencies that have driven its continued expansion.

The company’s focus is on manufacturing cheese, packaged milk, fresh milk under the Sungold label, butter and milk powder.

WCB’s seven foundations for business success

For over a century, the company has been living and breathing the following strategies:

1.    Market to niche customers

WCB’s strategy focuses on servicing the specialised needs of customers, here and overseas. Domestically, that involves meeting the needs of independent supermarkets, such as IGA, and helping those supermarkets meet the needs of their shoppers. Offshore, that means supplying specialised dairy products and ingredients that can’t easily be found elsewhere, such as whey protein concentrate and food supplements. Key overseas markets for the company areJapan,Korea,USA, Europe, Middle East andSouth East Asia.

“We’re not trying to be the biggest but we’re seeking to beAustralia’s leading dairy company; we work hard at selecting the right market opportunities,” explains CEO, David Lord. “We don’t try to do what everyone else is doing. We’re aggressively pursuing growth but we’re selective about where we compete.”

And it seems to work. At a time when the milk war price pressures faced by big supermarkets have hit other dairy companies hard, WCB is still growing its profits. “We’ve been able to balance the needs of our key stakeholders and shareholders and set a strong competitive price for our milk suppliers,” says Lord.

2.    Create a reliable supply chain

Investing in logistics has helped the business grow. Given prompt delivery is critical for brand reputation in the food industry, WCB own and operate their milk transport fleet to control quality and ensure freshness of milk from dairy farmers.

3.    Remember – capital is king

Floating on the stock market has enabled WCB to fund expansion into new technologies to meet customer needs and overseas markets.

4.    Set stringent production efficiency targets

Reducing costs to enhance economies of scale is a focus. Indeed, pushing down the cost of production, and pushing up the value and yield are part of the company’s Key Performance Indicators. WCB have been single-minded about maximising those ratios.

5.    Diversify risk with a mix of export and domestic customers

The company’s customer base is 40 percent domestic and 60 percent international, to offset currency exchange fluctuations and ensure all eggs aren’t placed in the one basket. WCB has had its share of downturns and worked with suppliers and customers to trade its way through.

6.    Invest in technology for future viability

To remain competitive, WCB continuously reinvest to maintain plant and equipment at its six on-site dairy production facilities.

7.    Choose suppliers in reliable climate regions

Consistent rainfall in supplier regions has enabled the business to thrive – especially given many competitors were hit by drought. The bulk of WCB’s dairy farm suppliers are from south-west Victoria, central Victoria and South Australia’s south-east.

8.    Future strategy

WCB is implementing a targeted growth agenda to build sustainable value for shareholders and stakeholders – balancing return with risk. Its diversified portfolio of local and overseas markets will continue to offset the fluctuating exchange rate and commodity price.

“We have 120 years of understanding our competitive advantage and of doing what we do best,” Lord points out, “and this is a filter for pursuing growth initiatives that’ll set us up for the next 120 years.”

Find out more about Warrnambool Cheese and Butter Factory

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