Family business goes far beyond the farm gate

By Country News on June 11, 2016
  • Family business goes far beyond the farm gate

    Inside Southern Processing.

  • Family business goes far beyond the farm gate

    10 litre bladders of milk are popular with some consumers.

The Mulcahy brothers from Kyabram have been on an eventful journey for the past 16 years as they navigated the worlds of dairy farming and milk manufacturing, all in the name of building a sustainable future in the industry they love.

Third generation dairy farmers, brothers Peter and David, now have a vertically integrated dairy business including feed and fodder farms, dairy farms and a milk processing plant.

In the early 2000s the family was faced with the decision to head down the path of milk manufacturing, which was not taken lightly.

Peter and David were struggling with rising costs and no prospect of taking control of their revenue stream.

The deregulation of the dairy industry provided the brothers with some cash to inject into something and, after convincing their other brother Wayne, who was a mechanical engineer, to come back to Kyabram, they went about setting up and building their own milk manufacturing plant.

Southern Processing has grown from a small domestic milk supplier to a significant independent processor of fresh milk and cream for both the Australian domestic market and overseas export.

“We started out with two employees, me and a lab technician,” Wayne said.

“On production days we would rope the family in and everyone would help, it was free labour and we couldn’t afford to pay anyone.

“In 2016 we have over 100 employees and things have certainly changed a lot from where they were back then.

“Originally we could process 4000 litres an hour. In 2008 we upgraded the factory to manufacture 12000 litres an hour and we are starting to hit our limits again.”

As with many new ventures, the road has been long and eventful with crisis meetings held regularly in the early years. The business changed direction a few times and the family struggled to make ends meet.

The business started out with domestic bottled milk and added a delivery service, which expanded into complementary products like eggs, bread, fruit and vegies, and internet ordering.

In 2008 the home delivery service was sold and the brothers decided to concentrate solely on milk processing.

It was during this period Peter discovered the benefits of A2 milk after a Queensland company started manufacturing it in 2002.

Peter met with the milk company, liked what he heard and the family agreed to supply A2 milk. The family immediately started the process to convert its dairy herds and today all the family herds are A2.

As the years progressed and the company expanded the brothers decided to purchase feed, fodder and agistment farms in different geographical locations as a risk management tool for the business.

“The lessons of the drought taught us it probably wasn’t a good idea to have everything in the one irrigation system or climate zone,” Wayne said.

“And doing everything ourselves gives us high security and integrity of the supply chain from farm to customer and that is very important to us as a business.”

The Mulcahy business has about 4000 milking cows supplying milk to the factory; 2800 are owned by the family directly, while the remaining are contracted suppliers all within 38km of the Kyabram factory.

Southern Processing chief executive officer Neil Longstaff said the business was determined to ensure its contracted farmers prospered into the future, along with the company.

“We understand our farmers’ needs and we pay differently to other companies.
“From day one our suppliers know exactly what they will receive for the season,” Mr Longstaff said.

“There are no step-ups and we pay cash out a lot earlier in the season so our suppliers have money when they most need it. Our pricing model is based on a lot of knowledge from David and Peter.

“We prefer family owned 200 to 400 cow operations and we aim to pay a better price over the long term. In a year like this I think our suppliers are quite happy with where they are sitting.”

The company also provides consultants and is looking at sourcing feed in the future for its suppliers.

The Mulcahy family realises that to have a sustainable business they need to look after every step in the production chain, which includes their suppliers.

By Country News on June 11, 2016

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