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An agreement on the Australian potato sector strengthens Mitolo while it prepares for a new season

The recent completion of an acquisition of Thomas Foods International's potato business and an increase in demand through the coronavirus pandemic has established Mitolo Group as Australia's largest producer of fresh potatoes.

11/9/2020

Frank (left) and John Mitolo have started this season's potato harvest.

The company, which is headquartered in Adelaide Plains in South Australia and has potato and onion farms in the Riverland and Mallee regions of the state, reports a 10 percent increase in demand for its potatoes since the start of the pandemic in Australia.

It started planting its first potatoes of the new season in the last week of October, but now faces a worker shortage during the summer harvest due to a decline in the number of international backpackers in Australia following the border closures in March.

Mitolo is looking to fill 60-100 jobs in Riverland, Mallee, and Adelaide Plains in the coming months to coincide with the harvest and has expanded its backpacker recruitment approach to school dropouts, the newly unemployed and college students. looking for summer jobs.

He's even encouraging the gray nomads to set up their caravans and head to where the jobs are.

Mitolo Group Managing Director and second-generation family member Frank Mitolo said strategies to attract more workers included ensuring affordable accommodation for them and offering incentives for the remaining backpackers to bring their friends.

"Getting enough accommodation at the right price is a problem, so we are testing all angles at the moment, as well as for school dropouts and people seeking summer jobs," he said.

The family-owned company has around 700 employees in South Australia, around 150 on the agricultural side and another 550 at its Virginia wash and pack plants. He also has around 100 workers on a brush potato farm in the state of New South Wales.

The TFI acquisition increased its capacity by approximately 20 percent and included a second packing facility, as well as a farm and the lease of another.

TFI, Australia's largest 100% family-owned meat processing company, bought potato producer Mondello Farms after the company went into management in 2013 and grew it under its Thomas Foods International Fresh Produce division.

Growth included the establishment of export markets in the Middle East and Southeast Asia.

The new agreement increased Mitolo's total annual production to 125,000 tons of washed potatoes, 50,000 tons of brushed potatoes and 35,000 tons of onions.

Mitolo said that prior to the TFI acquisition, the company's packing shed operated in double shifts and was at full capacity, allowing no downtime or upgrades.

"It has taken a lot of pressure off the whole project, especially if something big happens at one of the plants," he said.

"We have divided the load between the two plants to give us much more flexibility and the opportunity to update both sites over time, which was difficult to do when we only had one site," he said.

"We now have a bit of capacity in our system, which is good and we could potentially shift all production to one site for a short period of time if we needed to double-shift for 7 days."

The South Australian law firm, DMAW Lawyers, advised Mitolo on the acquisition.

DMAW Lawyers Director and Agribusiness Industry Leader Seva Surmei said the impact of COVID-19 held back some transactions early in the pandemic, but that M&A activity in South Australia's agribusiness sector he had recovered again.

"While it is still too early to identify the full impact of the pandemic, we are seeing some important deals taking place," she said.

“This has been a business combination that persists with their previous plans, advancing their succession or finding opportunities to make new investments, expand and prepare their operations for the future.

"Our advice to businesses during the pandemic remains the same: conduct your due diligence, review your contracts, and identify risk areas, paying particular attention to potential risks and also opportunities created by COVID-19."

South Australia grows 80 percent of the country's washed potatoes and Mitolo is now its biggest player.

In September, rival South African potato company The Pye Group announced that it would invest $ 35 million in a new potato packing plant in Parilla, about 220 km east of Adelaide.

Company director Mark Pye said the new washing and packing facility will be double the current production capacity at his Virginia-based facility, which was about 50,000 tons of potatoes.

Mitolo potatoes are mainly sold to the main supermarket chains and independents in most of Australia.

Mitolo said it already had a major white onion export program to Europe every year, but that the acquisition of TFI had allowed it to export to places like Hong Kong, Singapore, Taiwan, Dubai and Qatar.

He said exports now accounted for about 5 percent of the business, but he had plans to increase this to 10 percent in the next few years.

"They had a reasonably sized export business that we weren't really focused on, so this has given us a great opportunity for growth."

Like many primary producers, Mitolo has enjoyed strong demand for its products through the coronavirus pandemic.

"We've had a very good run through the entire COVID period and it's probably been running around 10 percent above normal," Mitolo said.

"Being winter for most of the time has probably helped, but how that plays out when things calm down we don't know yet, but hopefully some of that buying pattern will hold.

“Prices have been stable. We had a pretty good summer season for growing and the harvest was probably a bit above normal in terms of tonnage so we were able to fill the gap quite well and there wasn't a major shortage, which could have happened if the production levels were normal. or below average. "

Mitolo said the first signs of this year's harvest were that potato yields and sizes could be slightly below average.

“They were badly affected by the frosts in June, which was probably one of the worst we have seen, resulting in smaller-than-normal sizes and lower yields, but there will still be enough potatoes so that there are no problems. with supply, ”he said.

"But the quality looks beautiful."


 
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