Fight trade barriers, says Bonlac - Bonlac Foods

Business Asia, Sept 21, 1998 by Cameron Cooper

Bonlac Foods has warned Australia to oppose new Asian trade barriers and resist becoming "a dairy mine for the rest of the world".

Chief executive officer of Bonlac, Mr Phil Scanlan, said Australia had a poor record of controlling its food chain assets.

"The dairy industry, having been written off by government in the early '80s, has emerged as a potential exception but we have a long way to go," he said.

"Our industry currently is regarded as a cheap source of quality milk flow. Australia cannot afford to be simply a dairy mine for the rest of the world."

Bonlac is Australia's leading dairy group, exporting processed food ingredients to more than 50 countries.

Mr Scanlan said Australia must fight the potential imposition of new trade barriers stemming from Asia's financial turmoil.

"It is critical to our business that the recent economic difficulties in the region do not encourage a further wave of short-term protectionist thinking, either among the countries in the Asian region or in our own country," he said. Speaking at a Business Asia breakfast lecture, Mr Scanlan said the key planks of Bonlac's future strategies were:

* an efficient manufacturing structure;

* a streamlined supply chain;

* balancing milk flow with value-added marketplace opportunities; and

* maintaining Australian ownership and control.

Mr Scanlan said Bonlac's strongest markets were in Australia and East Asia, particularly Japan. International revenues contributed almost 50 per cent of the company's A$1 billion-plus total.

"Last year we were successful in expanding our presence in Asian markets. In the current 1998-99 financial year just started, we plan to consolidate our presence in an increasingly challenging and price-intensive environment," Mr Scanlan said.

He said Asia represented 30 per cent of total international dairy trade, while Australian dairy exports enjoyed a market share of about 35 per cent in Asia.

However, after import growth of 10 per cent a year for the past decade, some forecasts suggest Asian demand will fall between 10 and 20 per cent.

"Clearly the need to diversify into other markets, as well as maintain our track record in Asia, is a priority," Mr Scanlan said.

Bonlac already has a presence in markets such as the Middle East, Russia, Central and Southern America, and Africa.

Mr Scanlan said there had been misconceptions about Australia's strategic engagement with Asia.

"Many commentators incorrectly define these developments as acts of regionalisation," he said.

"Such analysis misses the point. Australia's strengthened institutional and commercial presence in Asia has been an act of globalisation, in which engagement with Asian societies and markets has built upon our long-standing ties with Europe and Northern America."

Mr Scanlan said it was important for Australian companies to collaborate with key Asian customers to help sustain business in the current climate of uncertainty.

"In Asia, Bonlac predominantly supplies dairy-based ingredients, which require close ties with our key clients. Despite the economic crash, Bonlac's business grew last year in our three key markets of Japan, the Philippines and Thailand."

He said maintaining high quality product and service at a competitive price was an essential aspect of managing the Asia crisis.

Bonlac has limited exposure to Indonesia and Korea, two of the region's worst-hit nations.