What you need to know:

• ASX-listed Bega has become one of Australia’s largest house of brands following acquisition such as Vegemite and Lion’s Dairy and Drinks portfolio including Dairy Farmers, Farmers Union and Dare, hitting annual revenues of $3.5 billion.
• Having weathered the storm of Covid supply chain challenges, inflation and now the cost-of-living crisis, the business has switched focus from operational efficiency into branded growth.
• To do this, it’s switched out longstanding agency partner, AJF, in favour of The Royals for Dairy Farmers and Thinkerbell for Dare – bringing “fresh eyes” to the task of building creative and brand equity.
• It’s also centralised marketing, insights and customer-facing functions, a move that’s enabling the business to leverage siloed smarts across commercial acumen, owned brand asset management and solid FMCG consumer marketing discipline and fully engage the 4Ps of marketing in its growth quest, says EGM beverages Darryn Wallace.

In case you hadn’t noticed, ASX-listed FMCG giant, Bega, has become one of Australia’s largest houses of brands without a multinational or global overlord. In seven years, it’s picked up iconic trademarks such as Vegemite, and spent $534m acquiring Lion Dairy and Drinks portfolio encompassing Dairy Farmers, Yoplait, Dare, Farmer’s Union and Daily Juice in 2021, more than doubling annual revenues to $3.5 billion in FY24, 86 per cent of which was driven by branded products.

With a fresh CEO at the helm, Bega has now moved firmly into a period of business and brand renewal that stretches from agency switch outs to centralising marketing functions in order to unite the commercial, consumer and owned / earned smarts of its acquired parts, EGM of beverages and former Lion Dairy and Drinks marketing chief, Daryn Wallace, tells Mi3. And it’s all in the name of three ambitions he believes will ultimately drive growth: Elevate the consumer across all brands; leverage the breadth of marketing as a technical discipline across the portfolio; and strive for strong commerciality in everything the team does.

“We have eight brands earning over $100m in revenue; the biggest is over half a billion in revenue. So the ability to connect with consumers, work across the breadth of customer and have an impact in the local market without a lot of corporate delay and governance regionally or globally – we want to keep building that story,” Wallace says.  

Where is Bega at in 2024

Wallace describes Bega as an organisation that has “shown heaps of resilience to get through the first four years of this decade”. First it was the supply disruption that came with Covid; then it was the inflation following it.

“Now we’re in the vice of the cost-of-living crisis,” says Wallace, pointing to a consumer “flight to value” including larger packs that are affordably priced, and a gravitational pull around bulk retailers, Aldi and Costco.

“Through all that there’s the power of our brands to combat and maintain customer and consumer equity: It’s how we stay in touch with consumers to ensure we are meeting them where they need to be met as they work through this cost-of-living crisis,” he says. “It’s also the era of good marketing. We have had to be good businesspeople in the first four years, dealing with supply chain. Now it’s about how we find out demand, keep that consumer equity and accelerate growth.”

For Wallace, that means fully leveraging the four Ps of marketing. Take pricing. “The muscle strength that came as a consequence of the surge in inflation was the ability to understand the equity of your brand relative to the pricing power of it, and the relative elasticities of it,” he comments.

“Most consumer goods businesses, if they haven’t already, have built a higher capability in pricing and revenue management. It’s how you continue that, rather than just being a means to an end at that point in time to cover rising costs. It’s about how you continue that as a discipline, whether it’s in product and innovation, the right advertising and promotion, price, and availability.”

All this saw Bega report 4 per cent revenue growth in FY24, including more than 6 per cent branded growth, to $3.5 billion. EBITDA was up 2 per cent, again driven by a 2.1 percentage point lift in branded EBITDA margin.

But it’s high time for rejuvenation and growth, says Wallace. Enter marketing restructure. Last year, Bega consolidated business units into one marketing team, one category and insights team, and one social and PR team. It’s also simplified customer-facing units so there’s one clear doorway into the business.

“If you’re Woolworths, a 7-Eleven or McDonald’s there is clarity irrespective of the product portfolio – you have that single point of contact then the business supporting that key account team,” Wallace explains. “We have tried to make it easier to do business with us by consolidating, then setting up what I’d call centres of excellence so we can knock off the barnacles, speed up the boat and accelerate our work. In that way, we’re driving focus on our core big eight brands.”  

Those eight power brands are: Dare, Dairy Farmers, Yoplait, Farmers Union, Bega, Vegemite, Daily Juice and Pure. Several are 100+ years old.

In complement, Bega is working to take the best aspects of each business’ marketing nous and bring it to bear across the whole portfolio. For example, Wallace points to Lion’s strength managing the marketing mix of a brand and driving ‘forward foresights’ around where the consumer is going.

“There was an innovation team thinking about second horizon work, and building a funnel,” Wallace says. “When I think of the Mondelez business we acquired – Vegemite and spreads – its strength was leveraging the fame of brands. The in-house, PR, social media teams were able to leverage owned and earned assets really well. It was probably a little more bottom end of funnel in how it would go about it. Given they had established critical mass with brands like Vegemite, how do we keep that level of fame going is key.”

Bega cheese, meanwhile, has significant scale, manufacturing know-how, and a high level of commercial acumen.

“In putting this together, we’ve looked at how we leverage that consumer marketing knowledge for everything. For example, in the past, it was about maintaining equity; now it’s how we grow it and have more people experience and taste Vegemite,” Wallace says. “It’s losing half a point to a point of penetration every year, so as the nation evolves, there’s this slow reduction in households or people that might be consuming it. But look at the diversity of the country: There’s so much diversity in food, there’s no reason why this can’t be appealing to the next generation of Australians, you just have to adapt your marketing. What we’re thinking about is a change of strategy around how Vegemite can unite Australia and be relevant, irrespective of your cultural origins or food preferences.

“All this comes back to embracing a unified view so we can grow the reach and penetration of our big brands, irrespective of their heritage. Then it’s about how we use some of our in-house skills like PR and social media across the whole business, not just earned and owned assets we had with Vegemite and peanut butter.”

For the Bega cheese business, marketing can help “valorize that product category more”,  Wallace continues. “We are bringing the Bega brand back to processed cheese in a way that brings some equity back into that category and elevates it in terms of role and importance. We’re not just a contract packer for others, we can apply that skill into our own trademarks as well,” he says.  

Dilution of creative: Why Bega switched out long-term partner, AJF

Which brings us to the subject of agencies. Under that header of ‘renewal’, Bega has in recent months severed ties with longstanding creative agency, AJF, and appointed Thinkerbell to its Dare brand portfolio and The Royals to oversee the 125-year-old Dairy Farmers brand. It maintains boutique player, The Mark Agency in Canberra for state brands like Pura and Master’s Milk in WA.

Wallace says it was time for fresh eyes. “AJF had long tenure, consistency and fitted well. As that started to be dismantled and they were sold to GrowthOps, I think we were losing some creative edge,” he says.

“At the heart of renewal for me is more people buying our brands. We don’t want to come off Dare’s platform of ‘A dare fix will fix it’ but can we continue to tell that story in an engaging way that has the next half a million people feeling intrigued about the brand.”

Early campaign work with Thinkerbell hit the market in October via outdoor and TV extensions debut in November. Over on Dairy Farmers, the brief to The Royals was to “advertise” the brand holistically to Australians.

“Dairy Farmers is such a beautiful brand but it’s still a series of product categories – white milk, yoghurt, cheese, cream, flavoured milk. We’ve done a lot of work to unify the brand identity and have it show up consistently, but I don’t think we really cracked the code of true advertising story,” Wallace says. “AJF was anchored by the past, in that the way business would have shown up was a series of products – Dairy Farmers milk, or Dairy Farmers Thick & Creamy yoghurt. It built a rhythm around the components of the brand.

“There’s a bit of what gets you where you are won’t get you to where you want to go. What has made this business good is brands like Dairy Farmers being able to compete in all these categories. It’s got to a certain share doing that geographically and through categories.”

What’s going to now make the business even better is building a Masterbrand that can compare to Arnott’s, Coca-Cola and McDonald’s, says Wallace.

“To make big leaps you need to go ok, it’s not about incrementality or what we did in the past, it’s how we think differently about where we want to be in the future. The agency change is facilitating us trying to make bigger leaps; to think about the future and work backwards from there,” he adds.   

The first new-look Dairy Farmers work debuts in early November and Wallace believes “The Royals have cracked a magical campaign.”

“It will truly harness the spirit of Australia told through a 125-year-old brand, being Dairy Farmers,” he claims. “It goes to fresh eyes coming at the problem in a new way, with creative license, to bring us a new story.

“We believe in the combination of nutritional goodness with unlocking the spirit of Australia with resilience to farm, and the joy when you’re getting good, fresh dairy – it’s how to bring that to life emotively. It was a pretty simple brief: Bring to life the spirit of Australia told through dairy. They [The Royals] have been able to crack what I think is a compelling thought that can sit across all those products.”

It’s the fear in “myopic” constraints internally and an agency’s freedom to think differently which has Wallace sticking by the power of external agencies over more in-house capability development.

“Too much in-house is counterproductive in that it can slow you down. Time is telling me there are elements you want to be really good at, and for us it’s making good quality fresh produce and getting it to the customer in a really reliable way, engaging with what the customer needs so consumers get your products consistently,” he argues.  

“I do think there’s been a dilution in the level of creativity that’s coming out of agencies – it’s been a bit fussy for us to find the right people, as we have. But I think it’ll pay back for us as a model. Advertising agencies have gone through an evolution but they still play a critical role in challenging you on how you communicate to the consumer in a way that has more people see you more relevantly.”

And they have plenty to work with given Bega’s brand portfolio.

“The beauty of this business is we’re managing in some instances multi-century brands, which has established some of what’s possible and what’s not. But they’ve all got way more expandability than they currently have,” says Wallace.

“Where can we take Dare in coffee for example – there are more formats, more occasions we could execute into it… Farmers Union is arguably a culinary brand in many ways and goes in any food type. So how do we interpret those different occasions in how we think about it as a brand and series of brands? All these brands have a versatility so if we’re open-minded and creative, it opens us up to growth.”

Changing consumer behaviour is equally underpinning Bega’s incremental innovation. Just take the rise of plant-based milk and growing dietary complaints. In the last financial year, Bega’s expanding lactose-free milk offering more than tripled in volume year-on-year.

“One of our fastest growing innovations is having Pura and Dairy Farmers do lactose-free milk. One in four Australians are either diagnosed or self-diagnosing some form of digestive health or lactose intolerance issue. Putting those types of products in your portfolio keeps you modern and opens you up to new occasions to keep people in the brand,” Wallace says.  

Farmers Union is another product benefitting from incremental innovations. “Farmers Union is famous for its 1kg tub. But we’re growing our snacking in pouches by 30 per cent,” notes Wallace.

“Taking that yoghurt, putting it in snack format, whether it’s no-added sugar, high calcium – then driving that through advertising, is unlocking a lot of growth. Think about an old brand adapting to young families, that’s convenient, easy to put in lunchboxes, healthy: We’ve achieved double-digit growth through modernisations, product and packaging. It’s a signatory event that even if you are a traditional brand that’s well established, you can evolve and mature it.”

Getting the execs on-board

Alongside this this, Wallace is working hard to elevate consumer insights across the business and has had all executives sitting in consumers’ homes and going shopping with them.

“This was in part to understand market economics but also the lifestyle choices and way people behave and how therefore our products turn up,” he says, adding the activities are unbranded. “It’s bringing consumer empathy into the organisation to elevate that consumer.

“Irrespective of function – lawyer, engineer, finance – they all come back saying they loved it. Just getting out of your bubble means you see how consumers are balancing budget with lifestyle choices, the family, themselves. There is so much we can learn from sitting with consumers as marketing, but to build that collegial approach as an executive team around the consumer and where they are is vital.

“It’s about how we keep meeting consumers where they are so we can help solve their problems and use our brands and products to do that.”

One big one right now is the undoubted flight to value. Wallace points to growth in Bega’s business where it’s offering greater value such as larger packs that might be affordably priced, and points to a flight to bulk retailers like Aldi and Costco.

“There is this trading down piece and we’re seeing that play out. Our cheese business offers great value; white milk distributed through Aldi and Costco. And we’re having to work really hard to stimulate impulse consumption – convenience and impulse beverages, people are reducing shopping basket,” he adds. “It’s why brand building and innovation is so important; we need to find reasons for people to keep their frequency up.”