Dairy producers remain cynical on Coles’ new milk deal with dairy co-operatives.
The supermarket giant signed long-term deals worth $2.6 billion with Devondale and Norco on Wednesday.
Nobby dairy farm owner John Saville said farmers will only gain from the deal if Coles replaces its $1 per litre milk with a higher-priced alternative.
“If Coles are going to pay a premium on the milk, and it’s not going to go a dollar a litre, as long as that nonsense stops, it’ll help the suppliers.
“If this private labelled milk goes in as cheap milk, it’ll have the same effect,” he told The Chronicle.
Coles and Woolworths have attracted extra shoppers by heavily discounting perishable items such as milk, as people need to shop for it frequently. This has taken shoppers away from convenience stores and brought them to supermarkets.
Saville said the Coles deal looks like a measure to boost public relations.
“Being cynical I’d say they’ve picked the cooperatives for the PR exercise.”
On an episode of ABC’s The Checkout, Chris Reucassel said the deal could mean the supermarket giants would reduce processors’ margins and distribute those gains with the farmers’ collective, making lower milk prices more sustainable.
This is different from the Woolworths model, which only provides a premium farmer-made brand.
Lion and Parmalat control 90 per cent of the market for processing fresh milk. While Lion processes Pura and Dairy Farmers, and Parmalat processes Paul’s milk, they also process private label milk for Coles and Woolworths.
Reucassel also said processors pay farmers the same price for milk, regardless of the label. While it might be too early to know the long term consequences of the Coles milk deal will be for farmers or consumers, they concluded that this will negatively affect processors.