Beston Global Food Company, a major dairy producer in South Australia, has entered voluntary administration due to financial struggles from rising debt, interest rates, soaring energy costs, and high raw milk prices. This decision raises concerns for local dairy farmers reliant on Beston, with many owed over $600,000. KPMG has been appointed as the administrator, while failed acquisition talks with Megmilk Snow Brands Co Ltd leave the company’s future uncertain.
In a concerning development for the local dairy industry, South Australian dairy producer Beston Global Food Company has announced it is entering voluntary administration, citing a “perfect storm of adverse events” that have led to this difficult decision.
Impact on Local Dairy Farmers
Beston Global Food Company is one of the largest exporters of dairy products from South Australia, employing 159 individuals. Its reputation is built on award-winning cheese products, whey, and high-purity lactoferrin protein sold to pharmaceutical and health nutraceutical companies. However, the company’s collapse raises significant fears for local dairy farmers, many of whom may also be forced to shut down due to their reliance on Beston for business.
The South Australian Dairyfarmers’ Association reported that several farmers are owed more than $600,000 each, further complicating the financial landscape for local producers.
Factors Leading to Administration
In its announcement to the Australian Securities Exchange (ASX), Beston Global Food attributed its financial woes to a combination of factors that have escalated in the wake of COVID-19. Key issues include:
- Rising Debt: Post-pandemic debts have heavily burdened the company.
- Interest Rate Increases: The impact of rising interest rates has exacerbated the financial strain.
- Energy Costs: Beston has faced a staggering 300% increase in energy costs.
- Raw Milk Prices: The high cost of raw milk has further complicated operational profitability.
The statement noted that these escalating costs have made Australian farm gate milk prices uncompetitive in global markets. The company also highlighted challenges posed by the Australian Dairy Code legislation, which it claims fails to account for the volatile nature of dairy markets, contributing to the closure of 11 dairy processing businesses in Australia over the past 18 months.
Administrative Actions
KPMG has been appointed as the voluntary administrator for Beston Global Food Company. The firm has reassured stakeholders that business operations will continue as usual while seeking to secure recapitalization or a sale.
Beston CEO Fabrizio Jorge mentioned a previous offer from Japanese company Megmilk Snow Brands Co Ltd to acquire the cheese and lactoferrin production facility at Jervois, South Australia. However, this proposal fell through on September 20, which prompted the administration process.
Jorge expressed disappointment, stating that the Megmilk offer would have preserved jobs at the Jervois facility and increased the demand for milk processing. He emphasized that the successful acquisition would have benefited workers, loyal dairy farmers, and the broader South Australian community.
Recognition and Reach
Beston Global Food Company has earned over 160 domestic and international awards for its product quality. Its mozzarella and cream cheese products are distributed to more than 30 major companies across Australia and countries including Thailand, the Philippines, Vietnam, China, and Korea.
As the situation develops, the future of Beston Global Food and its impact on local dairy farmers remains a critical concern for the South Australian agricultural community.
