From next month, the supermarket giant will begin sourcing milk directly for its Coles brand fresh milk, and is promising to deliver better value, a fair and competitive farm gate price and more certainty to farmers.
Coles has not yet announced a price.
Under the sourcing model, dairy farmers can decide between one-, two- or three-year contracts.
Those who choose a three-year contract will receive a guaranteed price for two years and a floor price for the third year.
Saputo will process and bottle the milk under a toll processing agreement.
Coles chief operating officer Greg David said Coles was focused on strengthening the sustainability and long-term resilience of its suppliers.
‘‘In addition to offering a fair and competitive price, dairy farmers will have more choice regarding the length of contract and more certainty around income,’’ Mr David said.
‘‘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.
‘‘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.’’
The announcement has been welcomed by Australian Dairy Farmers, the UDV and advocacy group Dairy Connect.
UDV president Paul Mumford said Coles’ decision could lead to more competitive farm gate prices, which would be good for the industry.
However, he urged farmers to examine any contract closely to ensure they could maximise their benefits from a deal and to ensure the farm supply curve would fit with Coles’ expectations.
‘‘This may not be a panacea for all the industry’s problems and this move may only be applicable to some farmers,’’ Mr Mumford said.
Australian Dairy Farmers said more competition for milk was healthy, and the Coles deal had the potential for greater transparency within the dairy supply chain between farmers and retailers.
However, the ADF called for Coles to commit to ensuring $1-a-litre milk would not return to supermarket shelves.
Dairy Connect chief executive officer Shaughn Morgan said Coles’ new sourcing model would provide price certainty for producers.
The supermarket giant will also invest $1.9million in the newly established Coles Sustainable Dairy Development Group to fund research into more sustainable farming practices; adoption of new technology; more efficient use of pasture, feed and water; and support for business development and talent retention.
Coles said farmers would have a direct voice in how funds were used.
■Farmers interested in contracting part or all of their milk production to Coles can send an expression of interest to: milksupply@coles.com.au
