Australia’s Largest Dairy Processor Announces Factory Closure

Milk and dairy products on display in a supermarket in Albany, Western Australia, on Jan. 11, 2024. Susan Mortimer/The Epoch Times

Australia’s largest dairy processor—the maker of Pauls, Oak and Ice Break products—has announced the closure of its West Gippsland factory by early 2027, with the expected loss of around 50 jobs.

The redundancies will likely impact the 4,000 residents living in and around the small town of Longwarry, where the jobs represent about 7.5 percent of the workforce at the last census.

The company said in a statement released to The Epoch Times that it is “committed to comprehensive consultation and support for affected employees, including redeployment opportunities within the Lactalis network where available.”

Lactalis acquired the factory in 2019, but a “comprehensive review” following its purchase of competitor Fonterra Australia last year revealed a surplus of production sites and insufficient raw milk volumes, necessitating a consolidation.

Longwarry, which specialises in milk powders and speciality dairy ingredients, has been operating at around 40 percent capacity, making its long-term operational costs unsustainable alongside larger, neighbouring assets.

Production from the plant will be spread out to Lactalis’s nearby Darnum factory—also in Gippsland—which operates at about 70 percent capacity and has more modern facilities.

The Longwarry closure will occur in stages, with partial shutdowns beginning in August and running through to November, with complete closure expected in the first quarter of next year.

Lactalis Chief Executive Mal Carseldine has assured dairy farmers that the closure will not impact milk supply contracts across the state, with collections set to continue uninterrupted during the shutdown period.

He said Lactalis remains committed to Victoria and has invested more than $100 million (US$69.74 million) at Bendigo, is investing $35 million at Lidcombe, and has committed more than $200 million to modernising manufacturing facilities across Australia through 2025/26.

The Australian dairy industry is facing restricted milk pools, high energy costs, and surplus drying capacity.

Export Demand Weakening

Dairy Australia predicts (pdf) that national production will fall by 2 percent overall in 2026/27 with international demand uncertain due to the Middle East conflict, which has also pushed up fuel and fertiliser costs.

The exchange rate—which has risen from US$0.64 in April 2025 to US$0.71 a year later—has weakened Australian export competitiveness. The Australian dollar is forecast to marginally strengthen over the coming year, driven by cash rate hikes, which will exacerbate the issue.

The National Dairy Farmer Survey results, which tracked farmer sentiment over the 12 months to February 2026 (although most of the results were captured prior to the escalation of conflict in the Middle East) recorded a clear lift in confidence among dairy farmers regarding both the future of the industry and in their own operations.

Victorian farmers were the key contributors to this uptick in positive sentiment. Optimism in their own businesses rose from 71 to 80 percent, while optimism about the industry rose from 52 to 62 percent.

The United Workers Union was contacted for comment on this story.

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