Kiwi operations boost food giant

By Dita De Boni

SYDNEY - The Aussie crowd at Goodman Fielder's Sydney office are still fired up from Australia's win on the rugby field and in between ribbing the Kiwis are determined to put a sporting face on a disappointing full year result.

But while transtasman rivalry is "part of the cooperative culture here at Goodman Fielder" according to Sydney-based group managing director Doug McKay - a Kiwi - the company is quietly proud of the New Zealand Milling and Baking and Meadow Lea operations, which bucked the Goodman trend this year and made notable profit gains.

Goodman Fielder has shut 30 plants in the past three years and has not ruled out further rationalisations. The company's results briefing contained a healthy share of confessional - admissions of bad management of Australian poultry division Steggles and the luck of selling it for $131.5 million, and a loss of around $5 million in unwise commodity-buying practices - but all-up could not sweeten a disastrous first half year where net operating profits after tax fell 34.4 per cent, negating second half year improvements and leading to a net profit of just $20.6 million after abnormals.

However, there seems to be no need for mere qualified optimism in the case of New Zealand's Meadow Lea and Milling and Baking operations. While generic factors such as less competition and higher market share in New Zealand give the Kiwi factions an edge over Australia where "competition attacking ... at the fringes" made for a challenging year, New Zealand divisions aggressively moved into new product areas and rationalised operations across all divisions, markedly boosting company morale from this side of the Tasman.

Meadow Lea New Zealand, for example, is still a small part of the entire Goodman Fielder edible oils and food service division but increased sales from $21.7 million in 1998 to $76.8 million in 1999, largely due to the full-year contribution from Aspak Foods.

Goodman Fielder owned one-third of margarine-maker Aspak until buying out the remaining two-thirds from the dairy industry in early 1998 for $A27 million ($33 million). It has since boosted Meadow Lea margarines and "spreads" (under New Zealand law, defined as anything with less than 80 per cent fat) into clear market leadership position against competitor Unilever, maker of Flora margarine.

As with all Goodman divisions, Meadow Lea NZ has seen significant rationalisation but staff numbers have only dropped by around seven on the back of rising profits and volumes more than doubling to 42,400 tonnes during the year.

Perhaps the biggest indicator of the success of Meadow Lea's business is that in August, for the first time in New Zealand's history and despite a decline in the overall market, margarine has a larger share of the "yellow fats" market than butter - a fact largely attributable to signature brand Meadow Lea and low-fat, NZ-only "spreads" made from canola and olive oil which are starting to gobble market share.

Chief executive of Meadow Lea New Zealand Rob White says since Goodman acquired 100 per cent of the business in New Zealand, things have really started cooking.

"The benefits of integration mean that we can become more aggressive and sophisticated with our marketing and draw on additional resources and ideas."

Mr White claims that the level of growth in Meadow Lea New Zealand means the Kiwi operation is seriously looking at products to process here and send back to Australia, and has been able to grow its portfolio by acquiring the rights to process related products like bottled oil for retail and the recently acquired license to market and sell the Paul Newman range from the US.

"New Zealand is a strategic site for Meadow Lea and while we can't make any promises, I'm very bullish. I certainly think this plant has a role going forward, as well as the company having identified more key manufacturing sites in this country."

The bullish tone is echoed up the road in East Tamaki by Colin Wise, managing director of Milling and Baking New Zealand, who says work on brand identification has helped Quality Bakers - New Zealand's largest breads and baked goods makers - become the fourth most recognised trade brand in the country.

The Kiwi Milling and Baking division achieved a record year with a rise in earnings before tax - from $39.8 million to $46.5 million - despite a fall in sales, in part due to rival Tip Top gaining back capacity after a fire the previous year had seen $25 million worth of business pass through Goodman Fielder lines by necessity.

The company's manufacturing plant in Wiri, bought from the dying Georgie Pie company in December last year, has become the site for massive expansion of iconic New Zealand brands such as Irvines and Leaning Tower pizzas and has expanded the company's thrust into fresh chilled and frozen products.

The division is currently in the throes of organising an expansion of its core fresh business into pre-packed sandwiches and following its Australia counterparts into the arena of home meal replacements.

The current attempted entrance into Ernest Adams, which group managing director Doug McKay gleefully reported as gaining one per cent more of shareholder support on Friday, is yet another step towards "expanding into adjacencies - into heritage brands which compliment our portfolio," he says.

Goodman Fielder's other New Zealand division, Bluebird, has a portfolio that includes a full swag of 30 New Zealand brands such as Edmonds and Flemings, but dropped in earnings from $23 million in 1998 to $17.3 million in 1999 - a decrease the company attributes to fierce 50/50 rivalry in the New Zealand snack market between Bluebird and Griffins.

Despite strategy for Goodman still being guided by Australia - and more specifically the flamboyant, aggressive manner of chief executive and ex-actor David Hearn, who describes Goodman Fielder as "on the warpath" to find bolt-on acquisitions and "rationalise, rationalise, rationalise", the Kiwi crowd are low-key and looking to grow their business through the success of tried-and-true New Zealand brands.

And even if they have to take a ribbing on their losses on the rugby field, they can still claim a minor transtasman victory for Goodman Fielder New Zealand.

* Dita de Boni travelled to Sydney courtesy of Goodman Fielder.