Farmer-owned Australian dairy processor Murray Goulburn Co-operative has won a major contract to supply and produce private label milk for Coles from the middle of 2014.
Murray Goulburn's Devondale has reaped a ten-year contract to produce Coles home brand milk which will see it re-enter the daily pasteurised milk market; and Norco has also won a five-year milk supply contract.
The move will knock Lion out as the supplier of Coles brand milk.
Devondale is currently a supplier of UHT milk, cheese, butter and spreads to the Australian market. Murray Goulburn also sells yoghurt through a joint venture with Danone and exports dairy ingredients.
The company says it also plans re-enter the Devondale-branded daily pasteurised milk market through an initially exclusive agreement with Coles, and Devondale cheese will return to Coles’ shelves.
Murray Goulburn has also announced it will invest approximately $120 million in the construction of two new milk processing plants in Melbourne and Sydney.
The Melbourne plant will be located in Laverton next to its existing distribution centre, and the other plant is expected to be constructed in Western Sydney.
It described this as “the most significant investment in dairy processing technology since the dairy industry was deregulated in 2000” in a media statement.
The new plants will incorporate the world’s latest processing technology to deliver the highest possible quality standards while also assisting to position Devondale as the nation’s most efficient producer of daily pasteurised milk, according to Murray Goulburn.
In a media statement, Devondale managing director Gary Helou said that the daily pasteurised milk segment was currently mainly supplied by foreign owned companies that repatriate their profits to overseas shareholders.
“The entry of Australia’s farmer-owned co-operative into this market segment cuts out the middle man and delivers profits directly to farmers,” he said.
“This is a logical growth opportunity that extends Devondale’s domestic presence in consumer markets and is expected to lock in returns that will be paid to farmers through higher farm-gate prices. These higher prices will benefit all dairy farmers.”
Coles, meanwhile, is positioning the deal as a way to provide a better deal for thousands of east coast dairy farmers including long term contract security and higher farm gate prices.
“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 retailer said in a media statement.
Woolworths also recently indicated it plans to buy milk direct from farmers in a private label venture with Parmalat that would see it produce its own unpasteurised milk under the brand 'Farmers Own' .
