A group representing dairy farmers is calling on the competition watchdog to block the sale of two milk factories to supermarket giant Coles.
Key points:
- Australian dairy farmers want the competition regulator to block Coles’ bid to buy two Saputo milk plants in Vic and NSW
- Farmers claim the sale will give supermarkets more power over the farmgate price
- Coles has defended the deal, saying it has already acquired large milk volumes
In April 2023, milk processor Saputo announced it had sold its Laverton factory in Victoria and Erskine Park plant in New South Wales to Coles for $105 million, subject to regulatory approval.
The Australian Competition and Consumer Commission (ACCC) will decide next week if it will approve, oppose or impose extra conditions on the deal.
But in July, the ACCC outlined concerns the acquisition could trigger a major structural shift in the dairy sector.
Rick Gladigau is a South Australian farmer and the president of the Australian Dairy Farmers (ADF) lobby group.
He says the ADF is hopeful that the ACCC opposes the deal.
“Our concerns are losing transparency, losing the bargaining power and imbalance it can create for the farmer, and losing competition,” he said.
No trust for supermarket
A lack of trust for the purchase of key fresh milk dairy factories, according to the ADF, comes from Coles’ actions during the 2011 dairy downturn.
Coles introduced milk for $1 a litre milk on Australia Day 12 years ago, which sparked a price war between major retailers that lasted for nearly a decade.
“We’ve seen how they’ve operated, we’ve seen the care factor, and we all took the hit,” Mr Gladigau said.
“Dollar milk had a huge impact on the processors and … the farm gate price, and it just destroyed what used to be a premium market.”
Mr Gladigau said the ADF is concerned that there deal would remove third-party involvement.
“You’re now going to have a retailer that owns from the farm gate price right the way through to the shop shelf.”
Coles ‘confident’ in deal
When the ABC contacted Coles for a response to dairy farmers’ calls to block the sale, the supermarket provided chief executive Leah Weckert’s July 20 statement to the stock exchange.
“We will continue to work constructively with the ACCC on these issues,” the statement said.
“From Coles’ perspective, we see no lessening of competition in any relevant market, noting that Coles already acquires approximately 80 per cent of the volumes at the facilities and will provide milk processing service to Saputo Dairy Australia under a tolling arrangement.
“We remain confident that any outstanding concerns can be addressed so that the proposed transaction can proceed to completion.”
Mr Gladigau has not had any direct contact from Coles about farmers’ concerns.
“But if they are going to allow this sale to happen, there needs to be things in place to make sure farmers are protected into the long term,” he said.
He says this includes better protection for producers under the Food and Grocery Code, and for the code to become a mandatory set of rules between supermarkets, farmers and suppliers.
The ACCC is expected to make its decision on September 14.
