Glenda Kwek
April 10, 2013
The Age
Coles has sealed a 10-year-deal with Australia’s biggest milk supplier Murray Goulburn to supply the supermarket giant’s home-brand labels, which it says will allow consumers to have continued access to cheaper milk.
The deal, which will come in effect from July 2014, will also see Murray Goulburn relaunch its flagship brand Devondale’s daily pasteurised milk through an exclusive agreement with Coles.
Norco, the NSW North Coast dairy co-operative with 161 supplying farms, added today that it had secured a major milk supply contract with Coles that would begin at the same time.
The announcement comes after the ACCC said it would investigate Coles’ and Woolworths’ duopoly over milk suppliers.
Coles said the new contracts were ”a major win for farmers because we cut out the middle man and farmers get a bigger share of the retail price”.
”It is also a win for consumers because we can sustain affordable milk prices.”
The new agreement will see two milk processing plants built in Sydney and Melbourne for $120 million, Murray Goulburn Co-operative said, describing it as the ”most significant investment in dairy processing technology since the dairy industry was deregulated in 2000”.
”The milk price paid by Coles under this unique agreement locks in a premium that will deliver additional profits to Devondale dairy farmers over the life of the contract.”
Murray Goulburn will supply about 200 million litres of milk a year for Coles’ home-brand milk, which makes up just over 5 per cent of its production volumes, the co-operative added.
Devondale’s cheese products will also be sold at the supermarkets.
Devondale’s managing director, Gary Helou, said the new deal would bring profits back to Australian farmers.
”This is a logical growth opportunity that extends Devondale’s domestic presence in consumer markets and is expected to lock in returns that will be paid to farmers through higher farm-gate prices.”
In a letter to staff, Mr Helou said the board of Murray Goulburn was aware about concerns about prices for home-brand milk.
”Under the contract agreed with Coles the retail shelf price for milk does not determine the profits that will be received by MG supplier-shareholders,” he said.
Norco Chairman Greg McNamara said the new agreement would benefit their farmers.
“The consumer can have great confidence in the supply chain now that there is a direct link from the farm to the supermarket shelf,” Mr McNamara said.
Australian dairy farmers have said the so-called ”milk wars” between Coles and Woolworths since 2011 — which has seen milk priced at $1-a-litre in their supermarkets — have placed pressure on their ability to turn a profit.
Earlier this year, Woolworths said it planned to buy milk directly from local dairy farmers. The company said it was in negotiations with some NSW farmers to trial the new agreement, which would cut out the involvement of milk processors.
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