Lloyd Neilsen of Bean Growers Australia talks to us about the struggles of the country’s only remaining bean canner and what the future holds.

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In recent years Australia’s SPC Ardmona, the country’s longest standing fruit cannery, has struggled to remain afloat in a highly competitive market flooded with cheap imported products. It was recently announced that the ailing company would receive a bailout package worth $22 million from the Victorian Government, guaranteeing full-time employment for at least 500 workers at its facility in Shepparton.

The news was welcomed by members of Australia’s small but profitable navy bean industry, which supplies SPC’s “100% Australian Grown Baked Beans”. After Heinz moved its operations to New Zealand in 2001, SPC became the only bean cannery left in Australia, and its recent struggles had only intensified doubt surrounding the future of navy bean production.

Lloyd Neilsen, who has served as Managing Director of Bean Growers Australia since 2008, has firsthand knowledge of the situation and fully supports the efforts being made by SPC and growers to save an industry dating back to World War II. Though he recognizes the challenges of competing with international growers that can produce beans on the cheap, Nielsen is confident that the industry can survive through proper marketing and public support.

IFT spoke to Neilsen recently about the makeup of Australia’s navy bean industry and how it plans to move forward in the face of uncertainty.

It’s a constant challenge to compete with countries that have cheap labor costs and are supported by farm subsidies. You are always looking for ways to be competitive.

IFT: Tell me about the history of beans in Australia as it relates to your business Bean Growers of Australia.

Lloyd Neilsen: Well the company’s 50 years old this year. It was borne out of a farmer cooperative originally, predominantly to market Navy beans or pea beans. The history of navy bean growing in this area goes back to World War II. We actually had demand for navy beans for the U.S. army, and this was identified as an agricultural area where they could grow navy beans. After the war the growers wanted to continue to grow them and they did that off and on throughout the 40’s and 50’s. Bean Growers Australia was established in 1964. It was a marketing Co-operative and at that time we supplied three of the major canneries in Australia with navy beans.

It’s never been a massive industry—obviously Australia’s population is a lot lower than that of the UK or the U.S. We’ve produced a maximum of about 10,000 MT a year. We had some significant changes around 2000 because we changed from being a cooperative to a public company. We currently have about 385 shareholders, the majority of whom are farmers that accumulated their shares through a levy on their Navy Bean Production. Through the 90s in particular we realized that it was going to be difficult to compete and survive in the long term just processing navy beans so we moved into other bean types and specialty grains.

IFT: What were some of the significant changes in recent years that drove your company to adapt?

Lloyd Neilsen: One of the significant things that happened to us was in 2001 when Heinz, our major purchaser of navy beans, closed down their factory in Melbourne and moved to New Zealand. They were at loggerheads with the unions and it was costing them too much to run their factories, so they just moved everything to New Zealand. As a consequence their purchasing habits changed from requiring Australian beans to really just working on the back of Heinz’s demand out of the U.S. Obviously Heinz has a big impact on what happens in navy bean production in Canada and in the U.S. Heinz New Zealand can purchase on the back of the US and Canadian purchase program. They then exported all of their cans from out of Heinz New Zealand and back into Australia because their production was cheaper and it is a relatively cheap to ship them across the ditch, as we call it.

IFT: What was the impact of the departure of Heinz for Australian bean growers?

Lloyd Neilsen: : It changed their way of looking at the world because we were really left with one client in SPC Ardmona. The Shepparton Preserving Company and Ardmona cannery were the powerhouses of canning production in Australia first established as Grower Co-operatives in the very early 1920’s in the in Australia’s Riverina fruit growing district. The majority of their business is fruit canning. The two companies merged in 2002 and were subsequently purchased by the Australian arm of the Coca Cola Company, Coca Cola Amatil—they’ve got a great distribution network in Australia which they market much of their packaged fruit and fruit drinks.

SPC has been struggling with the changing market over the past few years — canned fruit in particular, which was their big ticket item. Sales for canned fruit just aren’t there anymore and there are many new packaging methods that have come into vogue, particularly with things like baked beans where they are packaged into microwaveable sachets for instance. The newer packaging styles have enabled more sophisticated marketing and branding in both main stream and niche products. This is a competitive market and many of the more traditional products and branding have been under pressure.

When I grew up in Australia it was traditional for people to have dessert at the end of a meal and have ice cream with canned fruit. Cultures and consumer habits changed. Canned fruit is just not as popular as it used to be.

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IFT: What’s been SPC’s approach to try to recover some of the market share?

Lloyd Neilsen: SPC Ardmona are faced with many of the same issues we have with Navy Bean Production. The high Australian dollar and cheap imports have really put them under pressure. To their credit they firstly challenged the cheap imports through Australia’s Anti Dumping commission. This was played out over several months through the Australian media and caught the attention of the Australian public. The support they received moved them to marketing their home grown lines as 100% Aussie produced.

Since the Global Financial Crisis and the rise of the Australian dollar our manufacturing industries have been falling over like sick cows. The major automobile manufacturers—General Motors, Ford and Toyota—have all announced phase outs of their factories in Australia. Manufacturing has really struggled. I guess if SPCA is going to persist it is only going to be through the support of the Australian public.

IFT: So SPC’s baked beans are primarily sourced by Australian growers?

Lloyd Neilsen: The SPC Ardmona 100% Aussie baked bean brand is 100% produced by our growers in Australia. It comes at a small premium as our cost of production is higher. We’re also competing for growing space with cotton, corn and other irrigated beans types. So any premium has to filter back to the growers. With the uncertainties in our industry, this season has been by far our biggest challenge yet. We have suffered the worst El nino drought in our history and there was momentum lost because of the question mark surrounding SPCA’s survival. We had to go back to the growers and say, look, SPC are 100% percent behind the Australian farmers and Australian Production. Just like the Australian public our growers have been very supportive. If there is one advantage we have over North America where they only get one crack at the season, we can go north of the Tropic of Capricorn and produce beans in our winter season. The Australian public has got behind SPCA and their 100% Aussie Grown campaign and the challenge for us is for us to ensure our growers can meet the demand.

IFT: What are some of the challenges of growing beans in Australia versus, say, North America?

Lloyd Neilsen: Obviously northern parts of the United States and southern parts of Canada around the Great lakes have the perfect climates for growing beans. They certainly do it very efficiently. In the majority of cases the beans are grown in rotation with the likes of GMO corn and soybeans. There is little in the way of weed issues because they’ve got that under control with their Roundup Ready crops. Due to their significant snow fall and cold winters they start the season with a full profile of soil moisture and have little in the way of insect pests. In Australia we have more our share of insect pests, and as a consequence we’ve got a lot more chemistry-related issues to worry about. Unfortunately the cost of production is higher than what it is in North America, and that flows right through to the cost of producing baked beans.

IFT: Are there a lot of growers who rely solely on navy beans?

Lloyd Neilsen: There are hardly any actually. Navy Beans work well in many of the farming systems where the soil type is right and they’ve got good irrigation. It’s probably one of the most challenging but most profitable broad acre bean types to grow. Many of these guys are corn growers. In North Queensland some of them are actually sugar cane growers. They’ll come out of their four year rotation with sugar cane, work their fields and get them back into shape with their cultivation and row systems and then plant down to Navy Beans before returning to Sugar Cane. They often have excess fertilizer because they fertilize their sugar cane quite heavily, and that works well with the navy beans. Although navy beans are a legume they are a lazy nitrogen fixer, so they work well on the back of corn crops and sugar cane.

IFT: If SPC does go under will these folks continue to grow navy beans?

Lloyd Neilsen: They won’t because to market them they would have to go back into the export market and quite frankly, because of the extra costs we have with insect and weed control, I think we would be uncompetitive in the export market.

IFT: Do you see that as a likely situation?

 

Lloyd Neilsen: No. Coca Cola Amatil and the Victorian Government pledged almost $100 million dollars between them for SPC to restructure and retool. Coca Cola Amatil is a very sophisticated company. They wouldn’t have done that without a well thought out strategic business plan. They will be expecting return on that investment within a short time. I believe the 25 million dollars from the Victorian government is based on the fact that SPC will employ a minimum of 900 staff at their Shepparton plant for a minimum of three years. They’re positioning themselves to be more competitive in the market. From our company’s point of view, we’re 50 years old and over the last two years we’ve spent over $3.5 million investing in a new cleaning plant, new storage and new packaging facilities. After a while your plant just starts to become old and uncompetitive unless you invest money back into it. It’s a constant challenge to compete with countries that have cheap labor costs and are supported by farm subsidies. You are always looking for ways to stay competitive.

Obviously from our Navy Bean origins we’ve been evolving over the last ten years and have made some big improvements. Unfortunately we’ve had a setback this year with the drought, but that won’t last forever. It’s certainly challenging us from a profitability point of view, but if we can get any sort of a season next year, we’re really in a position where we can do significantly more volume. We’re focusing on both the Australian domestic market and export markets. We’re adding value with our color sorters and polishers. One of the bean types that we do is adzuki beans, targeting higher quality markets in Taiwan, Japan and Korea. We’re optimistic because we believe the food business is a good business to be in. From a strictly Australian point of view, we are often challenged by climate change and the production issues it brings with it.

IFT: I understand you work with mung beans too.

 

Lloyd Neilsen: Mungbeans are in fact the biggest part of our business these days. They’re about 40 percent of our business. But it’s been a really difficult year for them also. People who have been contacting Australian traders will be aware that we’ve had the worst summer season on record. In 2012 and 2013 we suffered some of our worst floods and then followed it up with a record drought. Unfortunately that is the nature of agriculture in Australia. We supply sprouting and processing Mungbeans into the local Australian market, but the biggest part of our production goes into Southeast Asia, India, Sri Lanka, Malaysia, the Philippines, Singapore, and to a lesser extent China.