Mungalli Creek Dairy is a family-run company that uses state-of-the-art manufacturing equipment and traditional natural farming methods to produce a range of award-winning dairy products.
Established in 1920, the farm is surrounded on three sides by North Queensland’s World Heritage rainforest and is located just above Mungalli Falls. The farm is named after the sparkling Mungalli Creek which feeds Mungalli Falls before it travels 30km through lush tropical rainforest to the coastal plains below. This natural combination provides the farm with a pristine environment protected from spray drift. A mixed herd of Jersey, Swiss Brown, Aussie Red and Friesian cows graze year-round on lush grass-legume mountain pastures 800m above sea level in the rolling green hills of Millaa Millaa.
The farm is in a high rainfall area and the soils are predominantly derived from rich volcanic basalt that grows high-quality pastures.
The Watson family have owned the farm since 1964, and milk between 150-180 cows. The summer pastures are predominantly tropical grasses (seteria and brachiaria) and legume (pinto peanut) and rye grass and clover in winter. Due to the predominance of Jerseys in the herd, the milk is rich and creamy – ideal for making yogurts and cheeses.
They currently process 3-5,000 litres of certified biodynamic (organic) milk per day and expect this to increase to 5–7,000 litres per day by July 2010.
When did you make the decision to process your milk on-farm?
Robert Watson: In 2000, after the deregulation of the dairy industry, we decided to go in that direction, as the price for milk was predicted to go down considerably.
We had a unique milk – biodynamic – that was being sent into the factory and being mixed up with the commodity milk. We were encouraged by a marketing expert from the Department of Primary Industries (DPI). And my brother Danny wanted to try his hand at making cheese.
How did you choose what products to make?
Watson: We started off looking at cheese, as the same marketing expert said that other dairy lines were glutted. However, we found that cheese sales were too slow and cheeses took too long to mature, so we started with yogurt and then bottled milk sales. We now sell 70% bottled milk, 25% yogurt and 5% cheese.
Who helped with advice?
Watson: The DPI marketing expert got us started. On the technical side, we did a two-day cheesemaking course, read a lot of books and learned through trial and error. A stainless steel contractor helped us with the design of the initial plant.
Needless to say, we threw out a lot of cheese to start with. Finally, we found a retired cheesemaker in Millaa Millaa who helped us fine-tune the cheesemaking process.
Business-wise, we just jumped in and made heaps of mistakes and learned about working capital, employing staff, expansion etc, as we had to. We went to a few marketing seminars, which were helpful. Andrew Griffiths from the marketing professionals was very helpful and gave us his time and advice freely.
Financially, we struggled for a long time. Consultants seemed to be more interested in keeping us in the dark while sucking us dry. Some bank managers were very helpful while others went out of their way to make it hard. Our accountant was helpful and we also had lots of good feedback from local consumers tasting our products and various trials of products at the local weekly markets in the region.
Where do you sell your dairy products?
Watson: We sell 85% of our dairy products in North Queensland through the larger chain stores and smaller independent supermarkets, corner stores, hotels, coffee shops and foodservice. The remaining 15% is sold throughout Australia in speciality organic and gourmet stores.
From the market research we’ve done, 30% of our customers buy our products because they’re organic. 30% buy them because they’re local and the remainder believe they taste better.
What have been the challenges in choosing this route?
Watson: The main challenge has been to raise sufficient capital to grow the business and to become more efficient and make our products more affordable. Initially, we made and packed all of our products by hand, and while the set-up costs were low, the price of the finished product was high, which limited sales.
So we have mechanised the manufacturing and packaging of the milk and yogurt, which are major sellers and only make enough cheese to sell through our farm retail outlet ‘Out of the Whey’. While packaged milk and yogurt may not be as sexy as blue vein cheese or chocolate dairy desserts, they make life much easier.
We also had no comprehension of the new skills we would require as the business grew – such things as government compliance issues, raising capital, marketing, getting product into major chains, stock control and dealing with staff.
Being farmers supplying milk to a farmers cooperative, we hadn’t had to deal with processing, distribution, sales or marketing and so it was a huge learning curve. Other challenges included keeping a reliable milk intake throughout the year and attracting new biodynamic suppliers.
And there was the challenge of growing our markets. The packaged milk market has grown by itself, whereas yogurt and cheese have been a lot more competitive in our efforts to gain significant niche markets.
Have you ever regretted the move?
Watson: Yes, at times. We were fired up with enthusiasm, but as challenges came thick and fast, it has often been hard to maintain that initial enthusiasm. There have been long periods of time when it hasn’t been fun at all. That said, positive customer feedback and gratitude for the product helps us stay focused in these difficult times as well as the desire to stay successful and pay off the debts.
Now we’re getting the right systems, key staff and procedures in place to allow the place to run without us and we’re taking a bit more time to enjoy life. If we had had some basic business skills when we started, it would have stopped a lot of heartache over the years.
How do you see the future?
Watson: Organic, biodynamic and clean food are in strong demand as customers seek purity in their products and a connection back to the source of their food. That’s where the farming method we’ve chosen and our biodynamic certification give us an advantage. Customers seem happy to pay a little more for the security of knowing where their food has come from and that it’s pure and natural, with no chemicals, fertilisers, growth hormones or GMOs.
So there are definitely opportunities in the market place for growth, if enough farmers wish to change in this direction.
I think we have two choices. Either we have an opportunity to rapidly grow the business by taking on some local farmer investors, so that they can add value to their milk using our skills and infrastructure, or there’s a chance to slow down a bit and get some enjoyment out of what we’ve created.
**Geoff Platt is editor of Dairy Innovation magazine.**
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