Burra price boost after Bubs’ brush with Biden

Burra Foods announces price increase to $8.50-$8.90

WHEN the President of the United States, Joe Biden, took to Twitter on May 28 and announced that 27.5 million bottles of safe infant formula from Bubs Australia was coming to America, it was good news for Bubs, good news for US babies and good news for Burra Foods in Korumburra.

It turns out Burra Foods is one of the key suppliers to Bubs Australia, and local dairy farmers may have a key part to play in the supply of a further 125 million cans of formula, under a rescue deal to relieve an acute shortage triggered by a contamination crisis.

It is alleged that four American babies consumed contaminated baby formula manufactured by Abbott Nutrition’s Michigan manufacturing facility, two of whom died.

In February, Abbott closed its infant formula plant in Michigan after the Food and Drug Administration found contamination at the facility from the bacteria Cronobacter sakazakii. Four infants who ate powered formula from the plant were hospitalized with Cronobacter.

The tweet by the President sent the Bubs Australia market valuation surging a few days later by $115 million, and the big order for formula followed.

Here’s what he said: “I’ve got more good news: 27.5 million bottles of safe infant formula manufactured by Bubs Australia are coming to the United States. We’re doing everything in our power to get more formula on shelves as soon as possible.”

Abbott Nutrition is up and going again but the publicity given to Australia’s safe baby formula is likely to have ongoing benefit.

CEO of Burra Foods Stewart Carson was asked about the windfall on the ABC Country Hour during the week.

“Some of your milk supplies Bubs Australia. It must be a feather in your cap having the most powerful man in the world tweeting about it?” said ABC Country Hour presenter Warwick Long.

“We won't take credit for the great work that the Bubs team have done getting product into that market and then getting them on the radar for President Biden to put such a great name to it.

“But yes, we've recently partnered with Bubs to launch the new Bob supreme range in Australia, which is in Coles at the moment. It is being rolled out domestically and internationally. So, it's only a small part for us but we're really pleased to partner with them.

“We could see that being quite progressive, being quite strategic in the way they were looking at their nutritional infant markets. We knew that they had a play happening in the US and you know, everything's just fallen in the in their lap in many ways.

“So, we're really pleased to be partnering with them on the Bubs supreme range and we hope that's starts up some bigger and better things for Bubs in the US as well as their brand globally now.”

Mr Carson said that while Burra suppliers were made aware of the tie up with Bubs at their May supplier meeting, he said it was still early days for the Burra-Bubs partnership with Burra buying in A2 milk powder, rather than having it supplied direct, and reconstituting it for their new customer.

“But as the volumes start to stabilize and we can see the opportunities then we certainly have plans to bring fresh A2 milk in and make product for that A2 milk and we'll be talking to our suppliers in the first instance about that.”

Notwithstanding the president’s remarks, Mr Carson was also asked about the difficulties of opening up new markets in such a tight supply climate in Australia and he described the battle for milk as quite “intense”.

“We look at it a couple of different ways. We've got a lot of long-term, very loyal supply partners that we've been working with for a long period of time and milk retention is always much better than milk recruitment. So, you know, the first objective really is to make sure that we can retain the supply that we have.”

He said the firm had a number of long-term, exclusive suppliers but also noted that there were others due to come out of contract this year which the firm would be working hard to retain.

He said recruiting milk supply was difficult in a climate of a “shrinking milk pool in Australia” when demand for milk continues to increase.

“But we’re optimistic that we'll retain and hopefully pick up a little bit to replace some retirements that we've had over the last 12 months.”

Mr Carson said Burra held its supplier meetings in May, where it announced its opening price, because it wanted to give suppliers a really good idea where Burra was at coming into the new season.

Burra Foods announced an opening milk price range of $8.20-$8.60/kg MS for the 2022-23 season in May and has since revised that figure up by another 30 cents to between $8.50 and $8.90/kg MS.

“Yesterday we increased that by another 30 cents, so we're now $8.50 to $8.90. We always publish a range because we know that over 90% of our milk supply partners will land in that range. We don't like the concept of a headline price where a lot of people can't reach that price. So, we're really confident with that and we know that price range really suits our Gippsland supply base and we're very comfortable that over 90% of our supply partners will be in that range.”

Asked about announcing a price in the second week of May and then a step-up in the first week of June, Mr Carson said a month was a long time in dairy and the firm had since been able to lock away some of its contracts and also make a clearer assessment of input costs, which were rising just as they are on farm.

The escalating cost of gas for production was the big one, he said.

“We know input costs on farm are going up but believe me input costs are going up for processors as well. My gas bill has gone up tremendously. So, we needed to make sure we've covered all of those things. We've done that now, so, we feel more confident to be able to pass that additional 30 cents through.”

Fortunately, however, according to Mr Carson, Burra Foods locked away a 30 per cent increase in the cost of gas prior to the latest increases.

He said the firm had also invested “a few hundred thousand dollars” earlier in the year in boiler efficiency which was helping Burra mitigate some of the increase in price.

“I think people understand that you've got to manage your risk profile, but you've also got to put your best foot forward these days. No longer are you likely to pay step-ups during the year. It's more about putting your best price out there at the very start.”

Burra uses gas to fire its boilers to produce heat for the spray dryer. Both gas and electricity are significant costs with Burra taking a “green” approach by contracting over 90% of its electricity from renewables including wind power.

Mr Carson joined Burra Foods in June 2015 as General Manager Supply Chain and was appointed CEO in January 2020.