18 January 2016
by Greg Earl

Andrew Robb says Blackmores Bega venture is a role model for Australia


Barry Irvin, left, Li Na, Andrew Robb, and Christina Holgate at the Blackmores/Bega infant formula product launch.

Trade minister Andrew Robb has hailed the partnership between Blackmores and Bega Cheese to produce infant formula as the new role model for Australian companies looking for pathways into Asian business after the resources boom.

He said the joint venture was being closely watched in corporate Australia for lessons on downstream processing of agriculture products, high-end manufacturing and new supply chains into regional business, particularly to China.

The new infant nutrition products were launched into pharmacies across the country on Saturday, much earlier than originally planned when the partnership was announced in October amid the rapid rise in the Blackmores share price due to Chinese demand for its health supplement products.

Bega chairman Barry Irvin said the delivery of the product to customers less than four months after the announcement had been an "astounding performance" for a new food product, given the infrastructure, complex supply chains and quality controls needed.

He said this sort of manufacturing was usually scheduled about a year in advance to ensure consistent raw material supply, but the two companies had recognised the huge demand for quality infant formula and had pushed thier respective teams to launch the three products now in the market.

Chinese tennis star Li Na – Blackmores global brand ambassador – launched the infant formula at a function at Blackmores in northern Sydney on Saturday and joked that she didn't think the Blackmores factory looked big enough to satisfy demand for products such as infant formula in China.

SUPPLYING AUSTRALIAN FAMILIES
But Blackmores and Bega have committed to supplying 80 per cent of initial output to Australia to avoid supply disruption to Australian families from growing export demand for Australian baby formula. They will be channelling the remainder to established retailers in Asia including a new relationship with Alibaba Group's Tmall Global.

Blackmores chief executive Christine Holgate said interest from retailers had encouraged the two companies to escalate their planned production schedule and they were confident they would be able to maintain a consistent supply. But they were planning to manufacture about five times more than initially expected when the partnership was established last year.

She said the pooling of the two companies' historic expertise from milk supply to retail distribution meant they were better equipped to ensure a consistent supply chain in Australia and the region than any competitors. "We can really say we manage from the cow to the baby," she said.

Bega is responsible for manufacturing the infant formula, which Mr Irvin said would be the first step towards jointly making other milk-based nutritional products for older consumers. He said it was too early to say whether other manufacturing arrangements would be used, including Blackmores' facilities.

Mr Robb, who attended the launch, said the infant formula was a good example of how Australia could still compete in higher end manufacturing especially in the agriculture products sector where R&D was important. Exports of the infant formula will benefit from the abolition of the 15 per cent tariff on such products under Australia's new bilateral trade agreement with China.

"Blackmores and Bega have enjoyed success in Asia separately; together they will do even better," he said. "The success of these two companies is going to impact across the business sector in Australia."