Dairy processor Murray Goulburn has lost the $100 million contract to supply Woolworths’ private label cheese, following a competitive tender process.
As the AFR reports, in what has been a bad year for MG, it lost the contract to competitor Bega Cheese. The change will come into force in January.
MG retained the contract to supply Woolworths private label mozzarella shred cheese as well as the contract to supply private label butter, which has been expanded to include additional products and increased ranging. However, these are less lucrative contracts.
MG said in a statement that annualised revenue loss will be approximately $108 million, however the financial impact on MG in FY17 will be limited given timing of existing contracts completing.
MG’s interim Chief Executive Officer, David Mallinson remained upbeat despite the bad news.
“MG continues to enjoy a strong ongoing relationship with Woolworths and they remain a valued partner for our co-operative. We believe our tender to retain this business was competitive, whilst balancing acceptable returns for our products given the current environment for our farmer/suppliers and investors. I can also re-assure our valued consumers that ranging of MG’s Devondale and Liddells products are not impacted by this decision and continue to be available at Woolworths nationally,” he said.
In April, Murray Goulburn downgraded its forecast 2015-16 profit to between $39 and $42 million, down from its February guidance of $63 million. This came after the company had quoted a figure of $89 million in July last year.
As a result, the company retrospectively cut farmgate milk prices and left dairy farmers in a perilous financial position.