Peters & Brownes goes super premium

PB Foods, the parent of dairy manufacturer Peters & Brownes, has agreed to invest $7 million to expand production of super premium ice cream for the Japanese market.

This is the latest step in the Balcatta company’s long-term plan to expand its ice cream exports.

Chief executive Nigel Thomas believes ice cream sales to Japan will grow by 50 per cent over the next three years.

“We have a sustainable competitive advantage going into Japan that is hard to reproduce,” Dr Thomas said.

“We have the right milk, we have a cost advantage over Japanese milk and we are one of the few manufacturers who can manufacture ice cream at the right quality for Japan.”

PB’s exports account for about 10 per cent of the company’s $380 million annual turnover.

Dr Thomas said the company had achieved compound annual growth of about 15 per cent, after adjusting for the sale of the Tip Top ice cream business in New Zealand to its NZ parent, Fonterra. He said the company was currently fine-tuning its operations to strike a better balance between growth and profit.

“Strategically the company is now in a position where we need to move from high organic growth to higher profitability,” Dr Thomas said.

“If you want to grow you need to invest.

“We have been doing that very successfully under [former chief executive and part owner] Graham Laitt. We were less concerned about profit and more concerned with organic growth. We had tremendous organic growth.

“In the new era of ownership by Fonterra, they said to us: ‘We still want to grow but we want to get the level of profits up’.”

On the export front, the company will continue to focus on high-margin markets.

“We tend to specialise in Japan in super premium ice cream. That’s what we are good at,” Dr Thomas said. “That makes sense because it’s the biggest exploitation of our sustainable competitive advantage.

“It uses the most milk, it uses the most cream, it’s where you offer the least ‘oceanic’ flavour.

“We resist being dragged into areas that are higher volume but lower price and lower return in Japan.”

Dr Thomas said PB first moved into exports in the 1970s when it started supplying milk to Singapore.

“We started to accelerate our exports in 1991 when Japan deregulated,” he said.

“We were the first foreign company into Japan after they deregulated ice cream.

“One of the things we learned early is that you need to understand the Japanese palate and the Japanese culture.

“Japan is the most difficult market in the world for ice cream, both from a taste profile and micro-biologically.”

He said the company recognised the value of strategic alliances and was still supplying the same companies it started with in 1991.

PB’s growing export sales are additional to the expansion of its domestic business, built around brands such as Peters ice cream, Brownes dairy, Cadbury ice cream and Connoisseur super premium ice cream.

The growth of PB’s business means the company has been increasing the volume of its milk purchases from WA dairy farmers, in contrast to those of other large processors.

Dr Thomas predicted more rationalisation for the dairy industry, which he said had been shrinking for 25 years.

However, he emphasises there is a future for the industry, particularly for farmers with larger herds.