Bega Cheese: Current Strategy for Market Growth and Technological Advancement

In this analysis we will discuss about bega cheese current strategy and below are the summaries point:- Bega Cheese's current strategy focuses on increasing market share and profit margins. The company emphasizes capital management and cash discipline while investing in innovation and remaining technologically competent. Strategic decisions, such as acquisitions and partnerships, have contributed to Bega Cheese's business growth and strengthened its corporate value.

Bega cheese current strategy
From the analysis of the PESTLE, SWOT, Porter’s 5 forces, Porter’ value chain analysis, and
the annual report of Bega Cheese, it has been gathered that the company’s current strategy is
focused on increasing the market share along with profit margins. The company is very
discipline regarding capital management and cash (Wang, 2017). In 2018, the financial results
of Bega cheese indicated that the company is very committed to its focused strategy by
achieving total revenue of $1.44 billion (45% of the revenue mainly generated from dairy
consumer packaged goods). The company was delighted to announce an increase in revenue
by 17% compared to the year of 2017 revenue accounted at $1.2 billion (Bega sustainability
report, 2018). The company has developed a strategy to undergo rationalisation along with the
consolidation of dairy farming and milk processing, which helped the company to obtain the
predicted margin along with a higher competitive edge. Moreover, the current strategy of Bega
Cheese is to invest in innovation and is focused on remaining on the technical forefront within
its production process (Blagrove et al., 2016). Following such strategy to remain
technologically competent, Bega Cheese is making continuous improvements and making
investments which improve the operational efficiency. All five of its manufacturing plants
operate with having advanced technologies to make sure high productivity in commitment to
environmental management and sustainability (Harman et al., 2015). For instance, Bega cheese
is currently operating in fully automated software (ERP system) that enabled the company to
become a fully integrated business, increased efficiencies, and better decision making.
Furthermore, in terms of product processing, they have the most advanced technologies such
as robots, which helped Bega cheese to automate its operational processes (Samson & Singh,
2008). In terms of business growth, Bega Cheese turned out to be successful in increasing its
strategic growth with entering into a new agreement with Fonterra Brands in Australia this
strategic decision ensured that the company continuously supply cheese to Fonterra under
“Bega” along with other brand names to market (Kieser, 2018). This strategy offered the dairy
company with strategic advantages to focus on its core business of packaging and processing
bulk cheese whereas Fonterra took the responsibility to deal with traders. This strategy also has
set out a modified cost and pricing formula based on which the company attained royalty based
on Australian retail sales. According to (Hogan, 2018), in line with its business growth strategy,
the company acquired the Mondelez grocery business, which led to an increase in the milk
volume in 2018. At the same year of 2018, another strategic business decision of acquiring the

Saputo Dairy accounted at $250 million, which gave Bega cheese a full guarantee from Saputo
to supply almost 300 million liters until 2020 (Dyer, 2018).
In terms of strengthening its corporate value, the company built a strong relationship with the
local dairy communities and established a farm services team to help local farmers. By doing
that, it helped Bega cheese to create a strong affinity with indigenous people and make them
proud of buying such an excellent Australian brand (Bega sustainability report, 2018).
Furthermore, the company offers attractive remunerations to its key executive chairmen linked
with achieving the required profit margins, and proper incentives to its employees, which led
to increasing in the level of performance and contribution (Jones, 2007).
The sustainability strategy of Bega Cheese is centered on handling its processing plants to
assist suppliers in expanding their management practices through “Bega Environmental
Management System” that has the strategy aspect of securing milk supply. Besides, the
company established a long-term partnership with its main suppliers to ensure continuous milk
supply (Lindberg et al., 2017). The current strategy of the dairy company is to introduce new
product lines. In this strategy, the company has concentrated on developing new products
including cheese bars, cheese snacking along with bio-nutrients. With introducing new product
divisions, Bega Cheese is focused on penetrating a new market with an increased share in the
dairy industry of Australia and ensuring increasing growth in its business (Yayeh et al., 2017).
This strategy will support Bega Cheese in attracting more consumer base in Australia, and it is
also found that consumers have hanging taste and preferences in certain periods and
considering same, increased product diversification is required for the food items offered by
the company (Meurer et al., 2015). (Note: please refer appendices for PESTLE, SWOT,
Porter’s 5 forces, and Porter’s value chain).
Strategic Decision Analysis
The investment of $34 million on the lactoferrin plant seems to be feasible as it fits the
company’s efficient strategic position. Besides, due to the functional characteristics of the
lactoferrin extraction decision made by the company, its functional characteristics is
anticipated to make the new offering to be globally accessible in a range of consumer health,
pharmaceutical products, and nutritional health products along with attaining exceptional
growth in its bio-nutrients business (Pathak, et al., 2015). Furthermore, based on the analysis
of its current strategic position within the Australian dairy industry, the investment will be

profitable for Bega cheese in the short-terms along with its strong partnership with Coles. Such
growth in its strategic decisions previously has facilitated the company in attaining growth in
its market share and profit margin that can support business expansion investments of the
company. Moreover, getting up Lactoferrin plant can be profitable for Bega Cheese as the
emerging market economies are increasing growth all through the world regarding dairy
products demand with local supplies (Esty, 2017). International commodity price volatility and
reduction of milk production led Bega Cheese to achieve stable domestic along with high-value
export market opportunities.
Growth Recommendations
As per the strategic analysis of the company (see appendices), Bega cheese has to concentrate
more on product development, increase plant utilisation, and innovation to take advantage of
the anticipated industry rationalisation. The following additional growth recommendations for
the upcoming three years will be in support with a new lactoferrin plant in terms of decreasing
debts and recognising new growth opportunities as follows.
• In line with setting up a Lactoferrin plant, Bega cheese has to make a substantial
investment decision to reduce the environmental impacts as it considers as a large
emitter of carbon. Thus, the company is required to seek new ways to decrease such
emissions. It can be done through continuous improvement of its operational efficiency
in all of its manufacturing plants by having advanced technologies to ensure
commitment to environmental management and sustainability while attaining high
productivity.
• To maintain sustainability in the corporate relationships with the suppliers and
distributor, the Bega cheese’s business operations must be strategically linked with its
network. It can be done by strengthening the distribution networks of the company and
improve the level of cooperation with its current suppliers and distributors to maintain
sustainability in corporate relationships among them. Besides, they are recommended
to increase investment in the business initiatives that promote growth along with
sustainability in the milk supply. For instance, encourage suppliers to invest and
sustainably increase their milk supply to attain more extended time supply security,
which leads to long-term business growth opportunities. Further, it is highly

recommended to maintain long-term supply agreements with its supplier to ensure
responding to global consumers demands.
• The Bega cheese can obtain a competitive advantage through implementing Porter’s
generic strategy for competitive advantage and make full advantage of its rare
resources. Thus, Bega cheese is highly recommended to apply the cost leadership and
differentiation leadership approach, which suits the company in terms of reducing costs,
attain economies of scale, offer premium products (e.g. pediatric & child nutrition, and
pharmaceutical products), product innovation, attractive packaging, and build strong
brand loyalty through better marketing strategy (e.g. celebrities endorsement)
(Kossowski, 2003).
• To overcome the lack of product diversification, Bega cheese must introduce new
product lines (e.g. cheese chocolate, pharmaceuticals, skin care, and produce ice-cream
made with cheese) to attract more consumers to increase its market share.
Diversification can be done through a comprehensive marketing strategy, new
acquisitions, and technological similarity (Stone, 2001).

References
Bega Cheese., (2019). Retrieved from
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_BGA_2017.pd
f.
Blagrove, S., Hundloe, T., & Ditton, H. (Eds.). (2016). Australia's Role in Feeding the
World: The Future of Australian Agriculture. CSIRO PUBLISHING.
Deeth, H. C., & Bansal, N. (Eds.). (2018). Whey Proteins: From Milk to Medicine. Academic
Press.
Esty, B. (2017). Bega Cheese: Bidding to Bring Vegemite Back Home. HBS Finance Case,
218-001.
Harman, B., Cunningham, R., Jacobs, B., Measham, T., & Cvitanovic, C. (2015). Engaging
local communities in climate adaptation: a social network perspective from Bega
Valley, New South Wales, Australia.
Kieser, D. (2018). Synthetic foods and their impact on your portfolio. Equity, 32(7), 4.
Lindberg, R., Nichols, T., & Yam, C. (2017). The healthy eating agenda in Australia. Is salt a
priority for manufacturers?. Nutrients, 9(8), 881.
Meurer, B., Palmer, M., & Gras, S. (2015). Innovation hub fuels growth of Australia's dairy
industry. Food Australia, 67(4), 42.
Pathak, N., Hagare, P., Guo, W., & Ngo, H. H. (2015). Australian food processing industry
and environmental aspect–a review. In International conference on biological civil
and engineering (BCEE-2015) Feb (pp. 3-4).
Wang, B. (2017). Lactoferrin: structure, function, thermal denaturation and digestion.
Yayeh, Z., Kassa, A., & Dagnew, E. (2017). Milk Production, Marketing and Processing
Practices of Dairy Cattle in Debremarkos Woreda of East Gojjam Zone, Amhara
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Appendices