Brownes Dairy faces sale as Mengniu calls in US$200M loan

AUSTRALIA –  Brownes Dairy, one of the Western Australia’s oldest and largest milk producer, has been put up for sale after its Chinese lender, Mengniu Dairy Co., demanded repayment of a US$200 million loan. 

The move follows a default by Brownes’ parent company, Australian Zhiran Co., triggering an orderly sale process that has sparked hope among local farmers for a return to Australian ownership.

Founded in 1886, Brownes Dairy is a cornerstone of Western Australia’s dairy industry, employing around 300 people and generating annual sales of nearly US$300 million. 

The company, a market leader in milk, also produces yogurt, cheese, and cold coffee under its Hunt and Brew brand, distributed nationally through major retailers like Coles, Woolworths, and IGA. 

Its operations, centered at processing plants in Balcatta and Brunswick Junction, collect over 150 million liters of milk annually from more than 50 local dairy farms.

Mengniu Dairy, one of China’s largest dairy firms, provided the US$200 million loan to Australian Zhiran, a consortium-led entity that acquired Brownes in 2017 from private equity firm Archer Capital. 

The sale process, managed by insolvency firm McGrathNicol, was initiated after Australian Zhiran failed to meet loan obligations. 

Keith Crawford of McGrathNicol stated, “We are engaging with key stakeholders to commence an orderly sale process for the iconic Brownes Dairy.” 

He emphasized that the receivership is limited to the holding company’s shares, ensuring no disruption to daily operations.

Brownes Dairy’s chief executive, Natalie Sarich-Dayton, reassured stakeholders that the company remains financially robust. 

“Brownes is a very profitable business, and we are cash positive. There is absolutely no risk to our operations here,” she said.

 While praising the current ownership, Sarich-Dayton expressed enthusiasm for potential Australian buyers, noting that local ownership would be “wonderful for our brand and business.”

The sale has ignited optimism among Western Australia’s dairy farmers, who see an opportunity for Brownes to return to domestic hands for the first time since 2017. 

Ross Woodhouse, Brownes’ largest milk supplier, highlighted the need for competent management, regardless of ownership. 

The broader dairy industry is also active, with New Zealand’s Fonterra exploring options for its consumer business, signaling a dynamic market for potential buyers.

Despite Mengniu’s financial pressures, including a profit warning for 2024 due to falling sales, Brownes remains a strong asset. Industry observers expect significant buyer interest, driven by the company’s profitability and iconic status. 

The sale process is underway, with McGrathNicol aiming to secure a new owner to sustain Brownes’ legacy and support Western Australia’s dairy sector.

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