Ashgrove Cheese a shining example of resilience in economic volatility
A NEW report into Australia’s manufacturing sector found it is one of the most volatile in the world.
The Advanced Manufacturing Growth Centre report, Building Resilience in Australian Manufacturing, covers the period from 1996 to 2015.
One of the businesses featured as an example of how to ride out economic volatility is Tasmanian company Ashgrove Cheese.
The report found average output across manufacturing sub-industries, including the dairy sector, swelled to 20 per cent above trend during economic upswings while contracting to 20 per cent below this level during downturns.
This 20 per cent deviation compares with 14 per cent in Britain, 10 per cent in the United States and 8 per cent in Germany.
AMGC managing director Jens Goennemann said the report aimed to identify ways manufacturing businesses can protect themselves.
“The AMGC’s Sector Competitiveness Plan identified ways to drive competitiveness for Australian manufacturers, but there was an ingredient we found that needed to explain long-term performance, namely resilience,” Dr Goennemann said.
“Instead of seeing parts of Australia’s manufacturing base being wiped out in the next downturn, let’s rather learn how some of our manufacturers adapted and survived in such times of contraction.”
The report found a strategy of diversification and flexibility helped Ashgrove thrive, even in volatile times. One example was how low prices for skim milk powder led to Ashgrove shifting its focus on the butter market, where prices have soared amid a global surge in demand.
Adding to Ashgrove’s resilience is its position as a manufacturer of specialty cheeses, such as traditional cloth-matured and flavoured cheddars, for a high-value niche market.
The report says that despite the labour intensity of artisanal cheesemaking, Ashgrove Cheese continuously invested in state-of-the-art technology to lower production costs and increase output.
Managing director Richard Bennett said the idea was that by creating their own products and finding their own markets, the company would be more independent from swings in global commodity prices.
The report identified three strategies to help improve resilience.
One is to have an unassailable competitive advantage by offering superior products or services that are highly valued.
Diversification gives companies a competitive advantage across product segments, service offerings or geographically diverse export markets and enables them to respond to shifting consumer tastes.
For long-term success, companies must be flexible and have an agile structure allowing them to manage fluctuating input costs or change focus in the event of a downturn.