Australia’s more than a century-old obsession with ice cream appears to have reached its peak at a time when discretionary spending is subdued, and input costs have risen.
Bulla Dairy Foods, an Australian icon, is looking to international markets for growth in its ice cream business. To do that, it’s building connections with Asian customers interested in premium products, and betting big with a major manufacturing expansion.
Bulla was founded in 1910. Thomas Sloan established the Bulla Cream Company in Moonee Ponds, which sits in Melbourne’s inner northwest. His dairy farmer brother, William, supplied the milk.
Meanwhile, Australia’s ice cream obsession was beginning. The first scoops are believed to have been served in Sydney, New South Wales, just three years earlier. In the latter half of the roaring ‘20s, ice cream had spread as far north as Townsville, Queensland, over into Western Australia, and down into neighbouring Victoria. This is when Bulla entered the picture.
“Ice cream has been part of Australian life for generations, and so has Bulla”, says Allan Hood, CEO of Bulla Dairy Foods. “We’re proud of our 115-year history, still making products in our hometown of Colac in regional Victoria, as well as at our manufacturing sites across Melbourne, using fresh, locally sourced milk and cream.”
Australian ice cream consumption
Today, Bulla is still owned by the same three founding families and is now into its sixth generation.
But, after more than a century, Australia’s economy is finally experiencing signs of ice cream-induced indigestion. While hard data is difficult to come by, the US-based International Dairy Foods Association says Americans consume 1.31 billion gallons of ice cream, which translates to almost 15 litres per person annually.
According to one report in 2012, Australians were consuming an astounding 18 litres of ice cream. But a survey by Roy Morgan in 2019 indicated that consumer demand for ice cream had fallen 6 per cent, at least when it came to tubs.
Bulla’s CEO Allan Hood says local consumer behaviour is changing:
“We’re still seeing strong demand for high-quality ice cream, but people are shopping more deliberately. They want moments of indulgence, but within a tighter budget. They’re looking for trusted, locally made Australian brands that offer real value, and that’s always been our focus.”
More recently, consumers have been cutting back on discretionary spending in the wake of the post-COVID-19 inflation outbreak. Falling interest rates are expected to stoke domestic discretionary demand somewhat, but not that much. ANZ Research expects the Australian economy will expand by 2 per cent in 2025.
Meanwhile, producers are grappling with rising input costs, such as dairy, sugar and packaging materials, along with the energy prices for refrigeration and transport.
All this puts attention on international markets. For Bulla, international makes up just 4 per cent of its overall business, primarily in south-east Asia.
ANZ Associate Director Tony Fato, who has been working with Bulla for almost a decade, says the company has a longstanding presence in south-east Asia - and has been preparing for expansion when the time was right.
“With Australia’s ice-cream market reaching maturity and economic growth slowing, Bulla’s been eyeing up a number of Asian markets,” Fato says. “We support Bulla by our relationships that we have on ground in Asia.
“With our relationships in various markets across Asia and the south pacific, we're able to introduce them to relationships on ground that help them with their trade flows.”
Mr Hood agrees there’s a growing demand for high quality Australian dairy in Asia.
“Consumers are looking for products made with care, using simple ingredients and a strong sense of origin. We see a real opportunity to continue to grow our presence here,” he says.
Bulla Chief Financial Officer Anna Pezzuto was nominated as an ANZ Delegate on a trip to south-east Asia to understand demands on exporters to the region.
Sweet teeth erupt in Asia
The story of Australia producing high-quality agricultural products for fast-growing Asians economies is well known. China’s demand for baby formula is the most famous. Growing female workforce participation is driving up demand for baby formula globally, but Australia’s reputation for high food safety is what drove peak demand from China.
Regionally, the World Bank’s January Global Economic Prospects report says East Asia and the Pacific (excluding China) is expected to grow at 4.9 per cent in 2025, driven by a rising middle class. This brings with it discretionary spending. “These markets are growing fast,” Hood says. “Hong Kong, Singapore, Malaysia and now into China and Vietnam and the opportunities there, it's really exciting.”
Manufacturing expansion
To support future growth both internationally and locally, Bulla is investing in a major manufacturing expansion in Colac, Victoria, with a new site set to open later this year. This investment will help capture new market opportunities and position the business for long-term success. The expansion will enable Bulla to increase its production capacity and capability of its frozen portfolio.
“Innovation is critical to Bulla,” Hood says. “It's going to give us new capacity and more importantly, new capability, new products, new ice creams, fun, excitement and energy – both here and overseas.”
The timeframe from ideation to Bulla’s final investment decision was two-to-three years, Fato says. This occurred during a period when Australian discretionary consumer demand, the core of Bulla’s business, was unpredictable.
“We could see the consumer spending market around Bulla was uneven at the time we were working through this decision,” Fato says. “Luckily, we’ve got a long history with the company. There’s institutional memory on the Bulla board of working with ANZ back in the old ES&A days.”
ES&A, or English, Scottish & Australian Bank, was created in 1852 and merged with ANZ Bank in October 1970, in what was then the largest merger in Australian banking history. “It’s fair to say we’ve been through a bit together,” Fato says.
“What we’ve learned over the journey is Bulla’s core business is high-quality, staple products for the fridges of middle-class Australian families.”
Now, that journey is taking Bulla to its next frontier.
“We believe in Bulla’s south-east Asian growth story,” he says. “Not just because we’ve had boots on the ground in Asia for a long time.
“Our story shares so much DNA with Bulla’s origin story, which we’ve been lucky enough to have participated in.”
Alexander Liddington-Cox is a contributor at ANZ Institutional Insights
