Coles bought two milk factories in Victoria and NSW from Canadian dairy giant Saputo for $105 million. It announced to the Australian Stock Exchange on Monday that it would buy the sites at Laverton in Melbourne and Erskine Park in Sydney; the factories produce Coles Own Brand 2L and 3L milk.
Coles chief executive Steven Cain said: “Whilst improving security of our milk supply and our supply chain resilience in the dairy sector, these facilities also have sufficient capacity to facilitate further growth opportunities through new product innovation.” Fifth-generation Kergunyah dairy farmer Stuart Crosthwaite said he would reserve judgement on whether Coles entering the processing market would change the industry landscape.
Mr Crosthwaite said Coles had runs on the board for giving farmers notice on their milk price. “A few years ago I would have been dead against it (Coles acquisition),” he said.” But Coles has done some good things in terms of price and giving farmers multiple year contracts so they have some vision around milk price and can get organised. “Everyone else waits until the end of June; if you have one year´s milk price you can´t invest with any confidence.”
“Coles knows that and people are waking up to that; $1 a litre for milk is way below the cost of production,” Mr Crosthwaite said. Murray Goulburn Co-operative collapsed in 2018 and its assets – including the two purpose-built factories to supply Coles milk – were sold to Saputo.
Mr Crosthwaite said time would tell how it all played out. “Murray Goulburn used to be a great company but it ended up losing direction,” he said. “Hopefully Coles is committed to the farmers.”
The sale follows Saputo´s announcement late last year that it was selling its Maffra plant. At the time, the company also announced it was investing $20 million to expand its Smithton (Tasmania) site and that its Cobram, Kiewa and Allansford facilities in Victoria were likely to benefit from further investment.
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