Coles push milk processors out delivering value to dairy farmers

Australian dairy farmers are finally catching a break with Coles Supermarket today announcing that they are sourcing milk directly from dairy farmers.

Next month Coles Supermarket will cut out the milk
processors and buy milk for its Coles brand two and three litre products
directly from dairy farmers in Victoria and Southern and Central New South

Previously, Coles relied on dairy processors to purchase
milk from farmers to supply for Coles Brand milk, under contracts that allow
the processor rather than the supermarket to set the farm gate price.

The supermarket will now pay dairy processor Saputo to process and bottle under a toll processing agreement.

“Over many years, Coles has developed direct relationships
with thousands of meat, seafood and fresh produce farmers supplying to our
stores; it is a successful model, and we think it can work in dairy too,” Coles
Chief Operating Officer Greg Davis said.

“If the model works, as we hope it will, we will look for
opportunities to expand the footprint to other milk-producing regions and
potentially other products in the dairy case.”

Australian Dairy Farmers (ADF) Chief Executive Officer David
Inall believes that more competition for milk is healthy and that the Coles
initiative has potential for greater transparency within the dairy supply chain
between farmers and retailers.

“We are hopeful that Coles will use this measure to build
closer relationships with farmers, but we are seeking further engagement on how
the initiative will work,” he said.

“Coles must also commit to ensuring that $1-a-litre milk
never returns to their shelves after the price was raised to $1.10 per litre in

“It is imperative that value is delivered through the supply chain, with famers receiving their fair share for the hard work, risk and investment that they have in this industry. This includes farmers securing their fair share for future retail price increases across the dairy cabinet.”

Coles will also offer farmers contracts with guaranteed prices
for two years and a floor price in the third year with flexible options of
supply – providing greater certainty on oncome and allowing farmers to more
confidently plan for the future.

The supermarket giant also announced it will invest $1.9
million through a new Coles Sustainable Dairy Development Group to fund
research to improving the sustainability of Australia’s dairy industry.

“ADF would welcome the opportunity to work with Coles in
ensuring this new development group delivers productivity gains to dairy
farmers across Australia,” Mr Inall said.

/Public Release. View in full here.