In a devastating blow to the Australian dairy industry, Beston Global Food Company, a major South Australian dairy producer, will cease milk production operations from December 6.
The company, which was placed into voluntary administration in September, has unfortunately failed to find a buyer, resulting in the loss of nearly 200 jobs.
The ‘Perfect Storm’ that Led to Beston’s Collapse
Beston, the Aussie company behind popular dairy labels like Edwards Crossing and Mables, had been facing a “perfect storm of adverse events” that ultimately led to its downfall. Despite recording impressive sales of $170 million in the 2023 financial year, the company struggled with low margins due to rising global dairy prices.
The Covid-19 Pandemic Takes Its Toll
The Covid-19 pandemic also played a significant role in Beston’s financial struggles. With relatively little debt going into the pandemic, the company came out with a substantial debt burden that weighed heavily as interest rates increased. Additionally, exceptionally high operating costs, particularly due to onerous energy prices, further added to the company’s troubles.
Australian Farmgate Milk Prices Uncompetitive in World Markets
Beston absorbed around $28 million of additional costs in 2023, including a staggering 300 per cent increase in energy prices. This came at a time when Australian farmgate milk prices were uncompetitive in world markets, an unintended consequence of the Australian Dairy Code legislation introduced in 2019.
Farmers Left with Substantial Debts
The collapse of Beston will not only result in job losses but also leaves many farmers with significant debts. The South Australian Dairyfarmers Association estimates that around 40 farmers are owed more than $10 million for milk previously delivered, which they are unlikely to receive. One such farmer, John Hunt from South East, claims the collapsed business owes him a whopping $700,000.
A Dark Future Ahead
“We still had that hope … and it’s not there now,” Hunt told 9News, expressing his disappointment and concern about the future. “We knew that money was gone, it’s going to put things back three to five years of capital expenses that we were going to do.” The shutdown of Beston Global Food Company will undoubtedly have a ripple effect on the Australian dairy industry, leaving many families and farmers uncertain about their future.