THE big news from Murray Goulburn last week might have been the loss of a lucrative contract with Woolworths.
But there’s an equally important issue looming for the firm’s shell-shocked supplier/shareholders later this month with the election of a board member to fill the vacant Gippsland suppliers’ position left vacant by the untimely death of Max Jelbart.
There are four candidates for the role; Leongatha’s Bernie Lubitz, Welshpool’s Kelvin Jackson, Newry’s Tim Dwyer and Maffra’s Raelene Hanratty.
After opting to take part in the board’s voluntary candidate assessment process, Kelvin Jackson and Tim Dwyer have been endorsed by the board as the preferred candidates, although MG has acknowledged that the election of the Gippsland Region Supplier Director “is ultimately a matter for supplier/shareholders” with a postal ballot to be held to decide the candidate who will fill the vacancy.
“Accordingly, the candidate with the most votes in the ballot will be put forward at the AGM on October 28, 2016 for election to the board.”
Ahead of ballot papers being sent out on Friday, August 12, suppliers will have the chance to hear from candidates (and also from interim CEO David Mallinson and chair Phil Tracy) at a meeting in Leongatha this Thursday, August 4 at 11.30am.
But it appears that the race for a board position has already been divided on geographic rather than purely ideological grounds.
One of the local candidates, contacted by the ‘Sentinel-Times’, Kelvin Jackson, said he wasn’t confident of garnering a lot of support from the Maffra area because “Maffra is getting behind its candidates”.
“Having a South Gippsland seat at the table is important, for sure,” he said this week.
And he feels he has the required experience, including board experience, that he would like to put into MG.
The ‘Sentinel-Times’ also tried to make contact with Mr Lubitz this week.
Both men have made extensive election pitches to suppliers (available on the MG website) with Mr Lubitz in particular voicing many of the concerns of fellow suppliers about the clawback provisions, pricing structure, lack of transparency and misjudgement of the market last year.
Mr Jackson has been equally scathing of the board’s performance:
“With an unprecedented claw back, a massive step-down in the milk price, a lack of transparency between management and the board, coupled with a culture that has clearly stymied good governance; never before have we seen the need for change at board level as we do today.”
He has also urged eligible voters to cast their ballots with only 44 per cent of available votes cast last time.
Ballots must be returned by Monday, August 29 and the successful candidate announced on August 30.
MG says ‘no impact’ on Leongatha factory
MURRAY Goulburn does not expect there will be any impact on its operations at Leongatha, or on the local workforce, as a result of last week’s announcement that it is set to lose its main contract with Woolworths.
The publicly listed co-operative disclosed to the sharemarket last Friday, July 29 that “following a competitive tender process Woolworths has selected a new supplier to manufacture and pack a range of its private label products including cheese, UHT, adult milk powder and cream”.
MG retains the contract to supply private label mozzarella shredded cheese as well as the contract to supply private label butter, which has been expanded to include additional products and increased ranging.
The “annualised revenue loss” has been estimated to be $108 million however the firm has been quick to point out the fortuitous timing of the end of the Woolworths contract and the start of a new $130 million contract with Coles.
“You win and lose contracts all the time in this industry and the significant part of the announcement for us was that we retained the cheese and butter business,” said an MG spokesperson this week.
“The Woolworths contract is set to finish in mid-January and the Coles contract starts at the beginning of February so we would expect there to be no impact at Leongatha or any of our plants.”
The spokesperson did concede, however, that all of the privately branded UHT milk presently going to Woolworths was packed in Leongatha but she was adamant the changeover to Coles would not affect either operations at Leongatha or the local workforce.
The firm did say last Friday that “MG will adjust future manufacturing planning to redirect this capacity to other markets” and such changes could be expected to affect its plants in the future.
But the MG spokesperson denied falling milk supply, as a result of either suppliers jumping ship or the lack of incentive this year, played a part in the MG contract negotiations.
“We weren’t concerned about carrying both contracts forward. Obviously we would have like to,” she said.
MG’s interim CEO, David Mallinson underscored the position.
“MG continues to enjoy a strong ongoing relationship with Woolworths and they remain a valued partner for our co-operative.
“We believe our tender to retain this business was competitive, whilst balancing acceptable returns for our products given the current environment for our farmer/suppliers and investors.
“I can also re-assure our valued consumers that the range of MG’s Devondale and Liddells products are not impacted by this decision and continue to be available at Woolworths nationally.”
Local Murray Goulburn suppliers will be able to ask, if not hear firsthand in Leongatha this Thursday, August 4 what actually happened with the Woolworths contract when Mr Mallinson and board chair Phil Tracy come to town.
Of course, this week’s supplier meeting at the Leongatha Football Rooms, starting at 11.30am, is being billed as a chance to meet the Supplier Director Candidates, including Leongatha’s Bernie Lubitz and Welshpool’s Kelvin Jackson, in the running for the Gippsland position on the board.
But with “the lack of communication” high on the list of gripes supplier shareholders have with their company at the moment over the milk price/clawback debacle, it’s very likely there’ll be more to say about the latest developments.
Kelvin Jackson acknowledged that the contract changes were “typical of what happened when the supermarkets put their contracts out for tender”.
“The same thing happened when we won the Coles contract to supply private-label cheese.
“The interesting thing is that we were criticised by Bega at the time but here they are undercutting us this time.
“You win some and you lose some. I also believe that because there is such fierce competition between Coles and Woolworths, they prefer to have their products coming from different suppliers.”
Mr Jackson noted, however, that he would be concerned if the local supermarkets were using the present low commodity prices to drive returns to farmers even lower.
“There’s always a lot of pressure from the supermarkets to cut the margins further which I think is pretty sad.”
An attempt was made to contact South Gippsland’s other candidate for the MG board, Bernie Lubitz.