Woolworths to axe $1-a-litre fresh milk but Coles refusing to follow

Benedict Brook
FEBRUARY 19, 2019
news.com.au
It’s the controversial product at the centre of the supermarket wars but despite Woolworths hiking prices, Coles is refusing to follow.

It’s been the product at the centre of the supermarket wars for years but in a shock decision that’s left customers scratching their heads, Woolworths and Coles will price their home-brand milk different.
Woolworths surrended yesterday, making the shock decision to raise the price of milk.
From today $1-a-litre milk will be axed in Woolies stores. The dairy staple will go up by 10c per litre.
A two-litre bottle of milk will cost $2.20 and a three-litre bottle $3.30.
The move applies to Woolworths branded milk only.
The supermarket giant has said the move will benefit struggling farmers who will receive “every cent” of the price increase.
Last week, Australia was shocked by images of thousands of dead cattle drowned by floods in northern Queensland.
Coles, Aldi and Woolworths have been under increasing pressure to raise the cost of fresh milk by the dairy industry that has long said $1 a litre is unsustainable and was sending farmers broke. However, Coles and Aldi have so far failed to respond to Woolies’ milk move.
In a statement released late yesterday, Coles said it would not be following suit and would instead explore “additional options…to best support Australia’s hardworking farmers”.
Coles also encouraged customers to support Aussie farmers by putting money in the donation tins sitting at each supermarket aisle from February 25.
The supermarket giant would then match donations dollar for dollar.
“Coles is passionate about supporting our farmers and producers and in the past six months has committed $16 million to support this important industry,” Coles said.
“This includes contributing around $4 million to almost 640 dairy farmers through the Coles Dairy Drought Relief Fund and more than $7 million in partnership with the Country Women’s Association, resulting in over 2,300 additional grants for drought-affected farmers.”
Coles said it was seeking a “long-term solution that does not disadvantage customers and supports our dairy farmers”.
Woolworths Group CEO Brad Banducci said times remained tough for farmers: “This is affecting milk production and farm viability, which is devastating for farmers and the regional communities in which they live. It’s clear something needs to change and we want to play a constructive role in making this happen.
“We believe the long term sustainability of our dairy industry — and the regional communities they help support — is incredibly important for Australia.”
Mr Banducci said the price hike would deliver higher milk prices to more than 450 Australian dairy farmers supplying Woolworths branded fresh milk.
“While we’re realistic this won’t solve broader structural issues, we hope it will help inject much needed confidence into the sector and the regional communities dairy farmers do so much to support,” he said.
Coles was the first supermarket to cut milk to $1 a litre. The move in January 2011 caused waves throughout the dairy industry and led rivals to similarly drop their milk prices.
At a senate inquiry into the dairy industry later that year, Coles’ then boss Ian McLeod said the firm was not “out to damage” farmers but the decision had been made to assist with the “hardship facing many Australian families”.
In 2013, Woolworths launched its “Farmers Own” brand. This was an alternative to the standard homebrand variety which saw Woolies dealing directly with dairy farmers rather than going through a processor that creamed off its own profits.
Since September, Woolworths has also sold a special “drought relief milk”, the price of which is now identical to the new price of the store’s standard milk, which it says has delivered $5.8 million to 285 dairy farmers. Woolies will now withdraw the drought relief milk given its private label milk will return the same amount to farmers.
Coles added a 10c levy to benefit dairy farmers at the same time but only to its 3ltr bottles. The levy ended last year.
Australian Dairy Farmers CEO David Inall has backed Woolies’ move: “There is no doubt that this is a game changer in the fight against discount dairy that has long frustrated the industry.
“It is reassuring that Woolworths has committed to deliver the full 10 cent increase back to those farmers who supplied the milk into that product category.”
Federal Agriculture Minister David Littleproud said he hoped the decision was the beginning of the end for Australia’s “$1 milk disaster”.
“Supermarkets can’t pretend selling milk cheap doesn’t hurt farmers and they’ve got to be called out on this rubbish,” he said.
The minister said Australia’s competition watchdog had found supermarkets used their market power to drive down what they paid processors, and processors used their bargaining power to drive down what they paid to farmers. “There were around 7500 dairy farmers in 2010 and now there are just under 6000 as the industry has consolidated. There’s no point having cheap milk for consumers today if it sends farmers broke.”
In NSW alone, milk production has fallen by 11 per cent over the past year and the NSW Farmers’ Association says Coles and Aldi must also act if they want a sustainable diary industry.
Woolworths acknowledged some customers would be dismayed by the price change.
“We’re acutely aware of the budgetary pressures facing many of our customers and have not taken this decision lightly,” Mr Banducci said.
“We believe it’s the right thing to do and a key step in shoring up fresh milk production in Australia. We’ll continue to work very hard to offer great value to our customers across their total shop.”
— with AAP.