Southland bakery says butter too expensive to buy from NZ dairy companies

RNZ News

21-05-2025

Family owned business Kaye's bakery in Invercargill makes belgian biscuits, afghans and slices sold in supermarkets and dairies.
Photo:
supplied
Skyrocketing butter prices have forced a commercial bakery in the dairy heartland of Southland to scour the global market for cheaper alternatives.
Kaye's Bakery in Invercargill sells belgian biscuits, afghans and other sweet treats in supermarkets and dairies nationwide, often using butter from Australia to make its products.
Luella Penniall owns the family business started by her parents Lois and Evan in the 1970s. She orders in 10 tonnes of butter at a time.
If the bakery is making large quantities of butter shortbread to order that increases the requirements.
She said it was too expensive for the bakery to buy butter directly from dairy companies in New Zealand, despite being located in the centre of one of the country's biggest dairy producing regions.
Kaye's instead uses an Australian broker to buy all its butter wholesale which Penniall described as "crazy".
"I work with a company out of Australia. It seems crazy but it's too hard to buy off New Zealand butter companies, you need to be buying more than 10 tonnes to get a reasonable price," Penniall said.
"I'll get supplied either Australian or New Zealand butter but out of an Australian broker."
Kaye's commercial bakery owner Luella Penniall (centre) with her parents Lois & Evan Penniall who founded the Invercargill company in the 1970s.
Photo:
supplied
Penniall preferred to support New Zealand farmers but when Australian butter cost less, that's what she used.
"There's no difference from New Zealand and Australian butter from a manufacturing perspective, the texture, the taste, the performance, it's all good."
In a quest to lower its ingredient costs, Kaye's recently put butter from America on the table in a trial.
"We were offered butter out of America. We checked the specs and it was really a lot cheaper like $3 a kilo. But it turned out the water content was actually a lot higher which would have been a disaster for us in manufacturing," Penniall said.
And while others might swap out margarine for butter, customers buy Kaye's biscuits for their buttery quality.
The company is now grappling with price rises for all its key ingredients which will need to be passed on soon.
"We do struggle with the cost of butter," Penniall said.
"Go back to 2022, only three years ago we were paying around $11 per kilo, and now we're paying $14 if not $15 dollars a kilo," she said.
"We do thousands and thousands of butter shortbreads for our brand and for other brands and it makes it expensive because the customer wants the quality."
She doesn't see the cost of butter coming down anytime soon.
"I think it's the new way of that particular dairy product," she said.
At last night's global dairy trade auction the price of butter fell 1.5 percent to US$7821 dollars a tonne, after hitting a record high of US$7992 dollars at the previous auction earlier this month.
The strength of world prices means dairy farmers are poised to receive record payouts of at least 10 dollars per kilo of milk solids.
Stats NZ data shows butter prices have increased significantly over the past year, with prices up over 65 percent in the 12 months to April.
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