Coles will bypass processors and purchase fresh milk direct from Eastern States farmers in an attempt to improve the struggling dairy industry’s farm gate prices.
The supermarket giant revealed last week it would start sourcing milk directly from farmers in Victoria and New South Wales next month for its branded fresh milk products.
Under the decision to cut out the middleman, dairy farmers will be offered long-term supply contracts by Coles ranging from one year to three years.
Canadian-owned processing company Saputo will process and bottle milk through a toll processing agreement.
National Farmers’ Federation chief executive Tony Mahar said Coles’ new sourcing model was a positive move for the industry but a “silver bullet” to solve the dairy sector’s woes did not exist.
“Dairy farmers are at the mercy of farm gate prices set by processors,” Mr Mahar said.
“In recent years profit margins have been narrowed to the point where it is unsustainable for some farmers to continue to operate.
“The end of $1-per-litre milk earlier this year was welcomed and (the) announcement by Coles is another step in the right direction.”
The milk sourcing model announcement comes after Coles joined Woolworths in axing the controversial $1-a-litre milk deal in March, increasing the price of its branded milk by 10¢.
Coles Brand fresh milk will remain in refrigerators at $1.10-a-litre, under the sourcing scheme.
Coles chief operating officer Greg Davis said buying milk direct would underpin the dairy sector’s sustainability, while not ruling out implementing the model in WA.
“Over many years, Coles has developed direct relationships with thousands of meat, seafood and fresh produce farmers supplying to our stores,” he said.
“It is a successful model, and we think it can work in dairy, too.
“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.
“We hope our customers will embrace the investment in sustainable dairy farming by purchasing Coles Brand fresh white milk.”
Mr Mahar said he hoped the dairy farmers’ fortunes were improving after Coles’ latest announcement and the supermarket giants’ $1-a-litre decision earlier this year.
“We know consumers like to support our dairy farmers and by and large they welcomed the doing away with $1 milk in March this year,” he said.
“We very much hope $1 milk is well and truly in the past.”