Tasmanian premier accuses Saputo of trying to kill off King Island Dairy rather than sell

The Tasmanian premier says he is worried a Canadian food giant may not actually be interested in finding a buyer for the King Island Dairy.

In September, the multinational Saputo said it had been unable to find a buyer for the beloved cheesemaker and would simply shut it down in mid-2025.

The dairy is the island’s biggest employer with 58 employees, and the news sent shock waves throughout the community.

At the time, Premier Jeremy Rockliff said the decision was “very disappointing”, offered support to the workers and farmers involved and vowed to work with the company to find a buyer.

But the government’s efforts to engage Saputo in discussions with “interested parties” have so far been unsuccessful and Mr Rockliff issued a statement on Thursday accusing the company of welshing on its responsibility.

“It would be a real blow to King Island if the multinational behemoth is planning to walk away from the King Island Diary brand to promote its other brands,” Mr Rockliff said.

“We do not call out this behaviour lightly, but we will not stand idly by while a global company welshes on its responsibility to work with the government for the benefit of Tasmania.”

Comment has been sought from Saputo.

Is the company diluting cheese competition?

The company also owns Tasmanian cheese brands Mersey Valley, Heritage Tasmania and South Cape and it was speculated at the time that Saputo may be shuttering King Island Dairy instead of selling to a potential competitor.

Tasmanian senator Jacqui Lambie raised the theory in federal parliament that week, calling the company “disgraceful”.

“We see time and time again multinationals, god damn them, buying into our Tasmanian companies … only for them to turn their backs on the locals before much longer,” Senator Lambie said.

In his statement on Thursday, the premier appeared to lend support to the theory.

“While Saputo has publicly expressed an intent to sell the business, it is becoming increasingly concerning that Saputo’s foreign headquarters may not be committed to finding a buyer,” Mr Rockliff said.

A spokesperson for the Department of State Growth said the state government had “engaged with, and referred, many interested purchasers of Kind Island Dairy” since Saputo announced its intention to sell the business.

“We understand that Saputo ultimately arrived at a shortlist of potential buyers and determined its preferred bidder,” the spokesperson said.

“The government also understands that Saputo’s preferred bidder is now proposing to only buy one of the two farms — which would lead to a substantial drop in output and capacity — and it is very concerned about what that would mean for the long-term sustainability of the business.”

The spokesperson said the state government is aware of several shortlisted groups interested in purchasing the dairy and farms with plans to maintain or increase capacity.

“The exclusivity period provided to Saputo’s preferred bidder has now expired,” they said.

“The government has subsequently re-confirmed the interest of the shortlisted bidder it has been engaged with and believes the best way to achieve a successful sale is for Saputo to re-engage with those businesses and enable them to progress their alternative bids as quickly as possible.”

Those parties, the spokesperson said, are commercial in confidence, but “include experienced and reputable parties from both interstate and Tasmania”.

The announcement of the closure has been compared to the 2012 closure of the island’s abattoir, which was then owned by Brazilian multinational JBS and heavily affected the island as it employed more than 100 people.

King Island Hotel publican John Smith said when the abattoir shut down, it took the island about four years to recover and that residents had been feeling positive about the island’s future until Saputo made its announcement.

“We certainly had quite a few years where we were getting on top of things and everyone was looking positive about going forward,” he said.

Optimism remains despite uncertainty

Although the future of the dairy remains in doubt, it has not been written off by industry experts.

Investment banker David Williams, a specialist in food business sales who advised on the JBS purchase of the abattoir, said the dairy could still have a bright future.

“I think they’ll probably have trouble finding a buyer, but … I, personally, think the business is salvageable,” Mr Williams said.

“I think it could be returned to the glory days. Perhaps not what it was 25 years ago, but certainly into a real business.”

He said he did not buy the argument that the island’s remoteness could affect its profitability, because people still wanted products from recognisable locations.

“King Island, the King Island name, and the provenance that goes with it is worth a premium in itself,” he said.

“That should be a premium to get over some of the cost problems.”

King Island Council Mayor Marcus Blackie said 2024 had been a challenging year for the community.

“I remain cautiously optimistic that King Island Dairy can still be saved. Serious moves are afoot at the moment to hopefully make that happen,” he said.

“Meantime, I encourage Saputo to be as forward-leaning as possible with interested buyers.

“We should all be able to come out of this as winners.”