!["The fundamentals in [the] Chinese market remain strong," says new Bega Cheese CEO Paul van Heerwaarden.](/content/dam/images/g/s/o/w/t/j/image.related.afrArticleLead.620x350.gsmklr.png/1479116056301.jpg)
New Bega Cheese chief executive Paul van Heerwaarden said challenges in China will be short-lived and the company plans to expand in Asia and bolster its branded product range.
Bega's chief operating officer will take over from chief executive Aidan Coleman, who is retiring in January after five years in the top post. Mr van Heerwaarden has held several roles in 7.5 years at Bega, where he helped turn around subsidiary Tatura Milk Industries.
He takes the helm as the dairy processor faces pressure following revelations that it fell short of sales expectations for baby formula in its joint venture with vitamin maker Blackmores in China.
Bega shares have tumbled nearly 30 per cent in the past three weeks after it was forced to take a $5 million to $7 million provision on the value of its JV.
"We will continue to progress that partnership," Mr van Heerwaarden told The Australian Financial Review. "The fundamentals in [the] Chinese market remain strong. The change in regulatory environment has caused disruption, and caused build-up in inventory. Once this inventory works its way into the market, we expect regular supply volumes to resume."
Chinese middle-class consumers have paid top dollar for products seen as being made in "clean" countries, but questions remain about a slowdown in consumption, in addition to the regulatory changes which will aim to reduce the number of baby formula brands sold in Asia's largest economy.
Rough patch
Mr van Heerwaarden's years of playing competitive chess – a game about strategy and tactics – may come in handy as he steers Bega through the rough patch ahead.
The keen sportsman is keeping a close eye on the world's single biggest shopping event – Singles Day in China, which took place on Friday. Alibaba Group posted $US1 billion ($1.3 billion) of sales within the first five minutes of its Singles' Day shopathon. Last year Bellamy's Organic was caught short of baby formula after a surge of buyers due to the 24-hour event.
"[Bellamy's] caught a lot of us by surprise. I'm about as good at predicting what's going to happen on Singles Day as I am on the US election," Mr van Heerwaarden said.
"We are closely monitoring over the next three to six months how the stock moves its way through the system, including Singles Day."
While China has been a key focus for Bega in recent years, it will expand in Korea, Thailand and Indonesia.
"It's about expansion of channels, geographies and product range," Mr van Heerwaarden said.
He flagged the possibility of acquisitions in the fast-moving consumer goods space.
"Even though we are a very strong branded foods business with our cheese, I want to move further away from manufacturing dairy commodities and use that capacity for branded dairy and other foods."
Key focus
He added a key focus in his first 100 days is continuing the group's growth in its packaged food business – including by making the supply chain more efficient.
The dairy sector has been troubled in recent years. Milk production globally is forecast to be flat in the six months from July to December. However, Mr van Heerwaarden said he has seen some green shoots of recovery as supply pressure eases, and demand picks up, which will help to drive up prices.
Mr van Heerwaarden added the confidence of dairy farmers would be at an "all time low" and take time to recover trust again, taking a dig at rivals Murray Goulburn and Fonterra Australia. The ACCC is investigating the pair over the cuts to the price paid to dairy farmers for milk solids.
"Bega has maintained our prices and transparency," he added.
Mr van Heerwaarden, 47, grew up on a dairy farm on the Mornington Peninsula with his parents who had emigrated from Holland in the 1950s. He has spent his career in various agri-businesses, including Cargill where he worked as an accountant in its beef, grain and oilseeds businesses. At an imposing 6'3" tall, he is no shrinking violet although Mr van Heerwaarden considers himself an introvert, choosing to read books and spend time on his family's cattle farm outside of work.