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Bellamy’s has signed a deal with global dairy giant Fonterra to help Tasmanian farmers switch to organic practices, in an effort to increase the local supply for the company’s infant formula products.

Bellamy’s will make an initial $5.5 million investment in processing assets, with the companies aiming to cover farmers’ costs of converting.

The ASX-listed infant formula firm has signed up to take the first 20 million litres of milk per year from the resulting organic milk pool, and will have first right over additional volume.

It has also struck what it calls “a multi-year agreement” with an affiliate of Victoria-based Australian Consolidated Milk to secure access to that supplier’s organic milk.

Bellamy’s chief executive Andrew Cohen said the agreements represented a step forward for both his company and Australia’s organic dairy industry.

“We hope to improve outcomes for Australian dairy farmers, support the Tasmanian dairy industry, and at the same time take greater control of our supply chain and cost structure,” Mr Cohen said in a statement.

“We believe the rising demand for our brand and high quality, premium organic infant formula in Australia, China and emerging Asia can become an important and value-added platform for Australian farmers.”

Bellamy’s shares jumped 6.8 per cent in early trade on Thursday, building on the previous day’s 4.5 per cent increase.

They were up 77 cents, or 4.5 per cent, at $17.68 at 1035 AEST.