The national competition regulator has given its tick of approval to the $600 million purchase of Lion Dairy and Drinks by China's Mengniu Dairy Company, rejecting concerns about reduced milk market competition in Victoria's Gippsland region.
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Mengniu, already indirectly a key stakeholder in Burra Foods, is planning to buy Lion’s nationwide portfolio of raw milk processing facilities, two of which are located at Chelsea and Morwell in Gippsland.

Burra Foods has a milk processing plant at Korumburra in Victoria’s South East.

Late last year Mengniu also bought the Bellamys Organic dairy business in Tasmania and Victoria for $1.5 billion.

While Burra and Lion Dairy and Drinks compete for the acquisition of raw milk, they are not close competitors
– Mick Keogh, ACCC

The Australian Competition and Consumer Commission’s investigation into the sale of Japanese-owned Lion, paid close attention to whether Mengniu’s ownership would have an impact on farmgate milk market competition in the dairy-rich region.

“While Burra and Lion Dairy and Drinks compete for the acquisition of raw milk, they are not close competitors,” said ACCC deputy chairman, Mick Keogh.

“Our investigations concluded dairy farmers are unlikely to switch between the two.

“The level of aggregation from the proposed acquisition will be relatively low, with Burra and Lion combined acquiring less than 25 per cent of raw milk in Gippsland.”

Two other large raw milk buyers, Saputo and Fonterra, and other smaller processors, operate in the local market.

Spare processing

The ACCC also found considerable spare processing capacity at other raw milk processors in the Gippsland region, giving farmers alternative potential buyers for their milk.

Burra Foods produces processes and distributes a variety of dairy ingredients, from milk and nutritional powders, to cream cheese, concentrated milk and bulk fresh cream for domestic manufacturers of ice-cream, yoghurt and cream.

Lion’s facilities Australia-wide produce fresh drinking milk, cream, yoghurt, sour cream and dairy desserts for an array of brands including Dairy Farmers, Pura, Farmers Union, Big M, Masters and Dare.

The dairy and drinks division also owns the Berri and Daily Juice Company brands and has a half stake in the Vitasoy plant-based milk alternative operation at Wodonga, Victoria.

Burra Foods

Mengniu, based in Inner Mongolia, is listed on the Hong Kong Stock Exchange and has a 43.3pc stake in another Inner Mongolian group, Fuyuan International Industrial Company.

Fuyuan, in turn, bought into the 40-year-old Australian-based Burra Foods in 2016 and now owns 51.3pc.

Local investors and Japanese food trading and processing giant, Itochu Corporation, are also Burra shareholders.

Lion, which has milk processing operations in all states, is selling off its non-brewing and alcoholic drinks business in Australia for its Japanese parent, the giant brewing group, Kirin.

Kirin bought the dairy division, including extensive cheese production assets, from Filipino food group, San Miguel Corporation in 2007 for $2.8b.

San Miguel had two years earlier acquired National Foods for $1.8b, and during the time it owned the dairy business, doubled its size by buying the Dairy Farmers co-operative’s extensive eastern state’s network for $910m.

Lion sold the last of its cheese assets to Canada’s Saputo last year for $280m.

Jerry Dakin’s cows have produced milk that helped feed families across the state for decades. Now, the longtime Manatee County dairyman has been recognized as Florida’s Farmer of the Year.

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