Prem Maan on a ‘super-premium’ Lewis Road launch, cost inflation and raising prices

The boutique dairy company, founded by former Saatchi & Saatchi boss Peter Cullinane and now owned by investment firm Southern Pastures, will be introducing the product into the domestic market this month.

Lewis Road and Southern Pastures executive chairman Prem Maan said the ‘super-premium’ product is traceable to a small group of Asure Quality-audited 10-Star certification farms owned by the vertically-integrated group – much like a single origin wine.

This differs from the current Lewis Road butter available domestically which is a blend using milk from a number of suppliers, and is sold for $6.90 for 250g.

The super-premium butter will have a domestic RRP of $7.49 for 227g when it goes on sale at Foodstuffs and Countdown – a substantial discount on the NZ$10 it sells for at leading US grocery stores, including the coveted Whole Foods Market.

“We have been able to provide a domestic price that is cheaper than our export price, which reflects our reduced transport costs selling here at home,” Maan said.

Despite this cost-saving supporting the launch of a new product domestically, Maan said the company at large was grappling with rising input costs and would likely have to revisit pricing across its portfolio, which spanned milk, butter cream, ice cream, and flavoured milk.

“Inflation is really an ugly, growing issue and something that people under 30 haven’t really experienced before,” Maan said.

“We do have some natural hedge for our export products [because of Southern Pastures’ ownership of some supplier farms], but for others we don’t.

“For those products, costs are going up – literally all of them are going up. While we are resisting for as long as we can, at some stage those increases will have to be passed on to consumers.”

Rather than seeing inflation as a one-off Covid-19 driven event, the former investment banker believed it was a permanent structural shift.

“I credit the Reserve Bank for being one of the first central banks in the world to see the signs and started to tighten, but that creates its own set of problems for business and consumers,” he said.

“So inflation is really going to be a problem for FMCG going forward.”

Against this backdrop, Lewis Road was banking on the sustainability credentials of its super-premium butter to convert consumers over time.

“The reality is that it costs a lot to farm the way that we do, and to prove it through independent auditing at every step of the way,” Maan said.

“We’ve taken a moral position that we won’t fall back on cheap palm kernel expeller to pump up production when we have low seasonal grass growth. So we have to invest in growing, storing and feeding-out forage-based diet.

“That’s a decision to preserve global biodiversity, to reduce our carbon footprint, and also to provide the healthiest product possible, because we know there are quality benefits that show up in the butter as a result.”

Maan said better nutrition and better environment were priorities and the super-premium butter was expensive to produce because of these commitments.

“We trust that by explaining these things and sticking to our principles, the butter and its quality, taste, and provenance will resonate with consumers over time.”

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