April 12, 2013

Coles signs contract for East Coast dairy farmers' long-term security

 

 

 

Coles announced new contracts with two Australian-owned dairy farmer co-operatives to provide long term contract security and higher farm gate prices for thousands of east coast dairy farmers.

 

The new contracts are 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 supply agreements with farmer-owned Australian dairy processors Devondale (Murray Goulburn Co-operative Co. Limited) and Norco cover Coles Brand milk supply in New South Wales, south east Queensland and Victoria.

 

The Devondale agreement is for 10 years and the Norco agreement is for five years. Both come into effect in mid-2014 when Coles' contracts with existing dairy processors in these areas expire. Arrangements in Western Australia, South Australia, Tasmania and Far North Queensland remain the same.

 

As owners of their co-operatives Devondale and Norco dairy farmer members directly receive the benefits of the new contracts. The co-operatives have more than 2,600 members between them and both will be seeking additional milk supply, providing opportunities for even more dairy farmers in all three states to share directly in the growth of these great Australian businesses.

 

Co-operative arrangements also offer dairy farmers greater price transparency. Coles will pay Devondale and Norco a premium for their milk which will be passed back to farmers. Like Coles' other fresh milk contracts the new agreements will also include rise and fall clauses to ensure the price we pay reflects any changes to the farm-gate price.

 

Announcing the agreements Coles Merchandise Director, John Durkan said, "Our customers want fresh Australian milk for their families and they want to know that the price will remain affordable in the future. Our job is to provide a quality product at a competitive price and at the same time ensure that the dairy industry supplying Coles is strong, innovative and customer focused. These new contracts with Australian farmer-owned businesses deliver on all these fronts."

 

As well as new supply opportunities for many dairy farmers, the new contracts will also see Devondale and Norco invest significantly in existing and new processing facilities to create modern and highly efficient production plants. The new Devondale plants will result in even faster deliveries of fresh Australian milk for customers.

 

Devondale Managing Director Gary Helou said, "This is a ground-breaking agreement for the Australian dairy industry and the most significant investment in new processing facilities since the industry was deregulated in 2000. We expect this agreement will lift prices at the farm-gate and our expansion will mean additional supply opportunities for members and farmers throughout Victoria and Central New South Wales".

 

Norco CEO, Brett Kelly said, "This contract not only benefits our dairy farmers but also means consumers can now have greater confidence that there is a direct link from the farm to the supermarket shelf."

 

The contract with Devondale will also provide customers with more choice as Coles supports the exclusive relaunch of Devondale branded fresh milk, adding it to the many other brands available at Coles. Under the new partnership Devondale fresh milk will become a new fresh milk choice for customers across the eastern states. Coles will also stock Devondale brand cheese from June this year.

 

Devondale processes approximately one third of Australia's milk production and represents almost 2500 member farms. Devondale will be looking to increase co-operative membership as a result of today's announcement.

 

Norco Co-operative Limited is based in Lismore (NSW) is a dairy based co-operative with 161 supplying farms. Norco is a quality manufacturer of a range of dairy products including milk, cheese and ice cream, a retailer of a diverse range of agricultural products across NSW and Queensland and a manufacturer of stock feed and pet foods in both NSW and Queensland. In November 2012, Norco purchased the milk sales, marketing and distribution business back from Fonterra so that Norco now provides an end to end milk solution from the farm to the supermarket shelf.