Incoming Murray Goulburn chief executive, Ari Mervis, will turn to the dairy processor's 2200 farmer suppliers to help craft a new strategy to restore the co-operative's fortunes.
The beleaguered processor behind the Devondale brand has turned to a 27-year veteran of the world's second biggest brewer, SABMiller, to repair its operations and win support from disgruntled farmer suppliers.
Mr Mervis, who starts his new role on February 13, said he wanted to listen to the processor's suppliers and from there formulate a strategy to revive the co-operative's profits.
"The intention with my first 100 days is to get out and about to all of the regions and engage with the supplier base," Mr Mervis said.
He was attracted to the position, in part, because the "organisation requires some resurgence and some leadership".
Mr Mervis was a victim of the beer industry's consolidation, leaving SABMiller in October after it was swallowed by the world's biggest brewer Anheuser-Busch InBev.
His appointment comes after a seven-month search following the sudden departure of Gary Helou in April, when the co-operative revealed it would retrospectively slash farm gate prices to its suppliers.
Its decision and subsequent impact on dairy farmers – some were forced to sell all or part of their herds – is the subject of an ongoing investigation by the Australian Competition and Consumer Commission and potential class actions.
Mr Mervis will need to address a supplier backlash.
A number of suppliers have ditched Murray Goulburn (MG) for other processors, a move the processor has admitted was affecting the price it can pay farmers.
MG relies on large volumes to generate returns from its large fixed asset base.
Mr Mervis said he was under no illusion that there would not be a challenging road ahead but promised to be open, honest and transparent with suppliers.
He is using his expertise in improving the fortunes at CUB, which had lost significant market share before SABMiller's acquisition.
Under his leadership sales of Victoria Bitter improved after a decade of losing drinkers.
Mr Mervis said when he joined CUB it had a fractious relationship with many of its customers.
"It may be a different set of stakeholders (at Murray Goulburn]) but they are all critically important," he said.
As well as restoring brands, Mr Mervis cut the brewer's headcount by 12 per cent.
Mr Mervis will be paid a base salary of $1.5 million but can earn short-term incentives of up to 80pc based on unspecified targets.
He can earn a further 90pc of his base salary in long-term incentives, but again the hurdles for earning this bonus were not disclosed on Monday.
Previous short-term bonus payments to its chief executive created an incentive to keep the milk price high.
Brewers running dairy assets have not done particularly well in Australia.
Japanese-owned Lion, which makes James Squire, Hahn and XXXX, has slashed the value of its dairy assets by more than half after a spending spree involving Dairy Farmers and National Foods.
MG chairman Philip Tracy, who recently flagged he would hand over as chairman following a period of succession, said the co-operative was looking for someone with operational experience and exposure to consumer goods.
"We can't wait for February and to get him in and started," Mr Tracy said.
Mr Mervis said he couldn't say what went wrong at Murray Goulburn but pointed out the dairy processor was not immune to cyclical downturns and he believed there was enormous opportunity to improve the business.
Melbourne has become home for the South African and his family.
His wife and son have become Australian citizens and Mr Mervis is keen to upgrade his residential status, which will become easier with a less punishing international travel schedule on the horizon.
He will take over from David Mallinson, who stepped up as interim chief executive in the wake of the milk price scandal.
Mr Tracy said Mr Mallinson led MG with "conviction and discipline during an exceptionally challenging period".
Elsewhere in the dairy sector, investors are concerned organic infant formula company Bellamy's could be delivering another dose of bad news to the market.
Shares in Bellamy's, which have fallen 44.9pc since the start of the month after a profit downgrade, were put in a trading halt ahead of an announcement by the company by Wednesday.
A report in The Sydney Morning Herald showed Bellamy's domestic market share had dropped from 25 per cent to 12pc cent between April and October, citing confidential supermarket and pharmacy sales data.
- This story first appeared in The Australian Financial Review
