Ethical sourcing and procurement

We ensure our procurement processes across the group are ethically and environmentally sound and work closely with suppliers to improve their quality, service and productivity. We help them develop innovations in packaging options, material and equipment. And we support them in the development and implementation of sustainable farming practices.

In 2010 we introduced a new comprehensive questionnaire for all new suppliers and for those who had not previously been audited by Lion Nathan. While the questionnaire was only applicable to Lion Nathan suppliers, all suppliers across the group will be required to complete the questionnaire in the future. The questionnaire requires suppliers to provide information on:

• Quality & product safety
• Quality systems
• Management of components
• Facilities
• Security, safety and environment
• Business continuity planning
• Sourcing, employee and community relations

Once this initial assessment has been completed, we either accept suppliers on the basis that they meet our standards or conduct additional audits on a case-by-case basis.

Farmgate pricing

National Foods procures over 1 billion litres of milk annually. The sustainability of dairy farming is a key consideration in our procurement approach. Our procurement policy recognises the different costs of production in different regions, and aims to send appropriate regional market signals to keep supply and demand in balance. National Foods also provides quality incentives to farmers.

Working with farmers

Our work with the farming community is designed to create a supply chain that delivers a four-way win: for farmers, customers, distributors and for ourselves.

To this end, we work closely with dairy farmers to provide support and help involve them in programs run by Dairy Australia. For instance, a particular area of focus for the dairy industry is to have an integrated response to climate change and natural resource management. This is being facilitated through specific Dairy Australia programs such as:

• Research into efficient use of resources and implication of policy and trading. Activities include: undertaking a lifecycle analysis in response to policy and market imperatives around climate change; increasing farm extension activities on soil fertility levels and water quality in catchments; and incorporating research and development into nutrient-use efficiency in forage extension activities.
• Life cycle analysis in response to policy and market imperatives. Activities include: providing farmers with practical help to manage climate change; developing mitigation options to help industry respond to carbon policies; and analysing and documenting appropriate farm systems and infrastructure responses to changes in water availability and policy.
• Lower Murray Darling basin review. Activities include: working with government in developing effective policy that aids the international competitiveness and sustainability of the industry.

We also funded and hosted workshops in Queensland and Tasmania in conjunction with Dairy Tasmania. These educated not only our own, but all dairy farmers, in how to deal with mastitis, an inflammatory reaction of the udder tissue in cows. In doing so, we are helping to ease the effects of the condition on cows and ensure the milk we deliver is of the highest quality.

Bobby calves

Every year a cow has a calf. Female calves (heifers) are mostly kept as part of the herd. The bull calves are mostly sold, either to the veal market (bobby calf), or grown for another 15 months for sale as prime beef.

The ethical management, transportation, handling and marketing of bobby calves are priorities for the Australian dairy industry. The industry has an animal welfare strategy that supports the federal government’s own strategy that was developed with the aim of ensuring that the welfare of all animals in Australia is promoted and protected by the adoption of sound animal welfare standards and practices. The dairy industry is committed to ensuring these agreed practices and standards are met.

National Foods is committed to, and strongly advocates, responsible animal welfare practices.

We collaborated with Dairy Australia and the Australian Dairy Farmers Federation to develop animal welfare policies and guidelines and actively promote these to our suppliers through on-farm quality assurance programs. These programs are independently audited annually in New South Wales, Victoria, South Australia, Western Australia and Tasmania, and biannually in Queensland. All suppliers must comply with the industry guidelines. From July 2011 when new contracts are entered into, we will be updating the relevant clause to clarify this requirement.

Palm oil

To support growing consumer concerns about palm oil plantations and the destruction of rainforests in Malaysia and Indonesia, we have removed palm oil extract from all our juice products and are in the process of changing our packaging to reflect this.

Genetically Modified organisms

LNNF products are not Genetically Modified (GM), and we ensure complete compliance with National, State and Territory Food Standards. National Foods has an extensive quality assurance program for its farm supply base, to ensure its milk supply is of the highest standards in terms of quality and food safety. Routine testing on finished products is carried out to verify that products are confirmed as GM free.