Bega Cheese has confirmed it will be supplying the entire range of Coles’ home brand cheeses.
The five-year contract will see the country’s largest ASX-listed dairy company manufacture and process natural cheddar as well as processed cheddar and mozzarella.
It is expected the company will produce 19 000 tonnes per annum, which Bega Cheese chief executive officer Aidan Coleman said will considerably increase operations.
“While Bega already packs around 14,000 tonnnes of Coles’ retail cheese products for a third party, the new arrangement will see an additional 7,000 tonnes of bulk cheese being manufactured through its production facilities,” he said.
“Coles and Bega Cheese will now formalise proposed arrangements into a long term agreement.
“Subject to this formal agreement being signed, it is anticipated that Bega Cheese will commence its direct supply of cheese products in the third quarter of 2012.
“In anticipation of commencing the proposed arrangement, production and ageing of cheddar cheese will commence immmediately at the Bega Cheese Coburg facility, in Victoria,” Coleman said.
The demand for milk for the products will increase by about 70 million litres, Coleman said, and will be sourced from new and existing suppliers in New South Wales and Victoria.
The Federal Minister for Agriculture, Fisheries and Forestry, Joe Ludwig released a statement welcoming the contract, saying it shows the dairy industry is capable of embracing change.
“I applaud Coles for this move – it’s great to see that more Australian product will be available on supermarket shelves,” he said.
“I am sure Australian consumers will be equally pleased to be able to purchase a product that supports Australian farmers and industry, with flow-on affects to rural communities.”
The Minister has faced increased pressure in recent months over the supermarket price wars which saw milk prices drop to $1 a litre.
Following an inquiry into the issue, the dairy industry expressed its outrage that Coles was cleared by the ACCC for its predatory pricing.
The Queensland Dairy Farmers Organisation (QDO) has accused the ACCC of reaching premature conclusions, when it said Coles had not breached the Competition and Consumer Act 2010 when it dropped the price of milk.