Coles is leveraging this vertical integration to bolster its fast-growing private label range. The acquired facilities, located at Erskine Park in Sydney and Laverton North in Melbourne, now produce all the two-litre and three-litre milk sold under the Coles brand in New South Wales and Victoria. A Coles spokeswoman stated the purchase was vital for security of supply and creating opportunities for future product innovation. However, for dairy economics analysts, the move confirms the supermarket’s formidable purchasing power, which will inherently limit the margin growth for branded competitors, according to Morningstar analyst Angus Hewitt.

The competitive landscape is defined by the three large incumbent players—Saputo, Lactalis, and Bega Group—who have also been active in significant corporate maneuvers. The latest major deal saw France’s Lactalis beef up its Australian operations in August 2025 with a massive $3.4 billion purchase of Fonterra’s consumer brands in New Zealand, including Mainland and Western Star butter. Earlier, Bega made a strategic shift in November 2020 by acquiring Lion’s white milk and flavored milks business for $534 million, gaining ownership of major brands like Dairy Farmers and Pura.

Industry experts anticipate that while large-scale M&A activity is slowing due to the already consolidated sector, the next phase will feature increased M&A among smaller and mid-tier operators. ANZ’s executive director Michael Whitehead suggests that these smaller players must add scale to compete effectively. This pressure is exemplified by the mid-2026 shutdown of Bega’s Strathmerton factory in Victoria and the collapse of Beston Global Foods in late 2024, demonstrating the market reality for smaller processors struggling to absorb rising input costs like energy.