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Coles in a Dairy Fix: Farmers Churn Up Opposition to Milk Factories’ Sale

Australian Dairy Farmers (ADF) is calling on the Australian Competition and Consumer Commission to block the sale of two milk factories to supermarket giant Coles.

In April 2023, 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.

Rick Gladigau, president of the ADF has told the ABC that they are 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.

Coles Buys Saputo Processing Plants
In April 2023, Coles made national agribusiness news when it entered into an agreement with Saputo to buy two of their processing plants – one in Laverton, VIC and one in Erskine Park, NSW.

At the time, Australian Dairy Farmers (ADF) released a statement noting the plans “with interest and caution”.

According to their April statement, ADF was concerned with Coles holding anti-competitive market power and control. They noted that if Coles were allowed to be a processor and a major retailer the supermarket giant would have “total control of every fresh milk price within the Coles sphere of influence”.

ACCC Raises Concerns
The ACCC released a statement concerning Coles’ purchase of Saputo’s processing plants in July 2023, identifying preliminary competition concerns and releasing a Statement of Issues.

In a media release, the ACCC noted that they were considering the ADF’s concerns, looking into “whether the acquisition would give Coles the ability to influence the market in a way that is currently not possible via its current position as a retailer of dairy products and purchaser of raw milk”.

The ACCC said Coles’ acquisition of the Victorian facility was unlikely to lessen market competition. But, deputy chair Mick Keogh said he was concerned about a reduction of competition for raw milk in NSW.

“It’s a first for a supermarket to be involved in processing to this extent — and to have that degree of capacity can result in significant changes in the market,” he said.

“These plants are very important in terms of the total processing capacity available, particularly in New South Wales.”

The ACCC is worried that Saputo — one of Australia’s major dairy processors — could exit the fresh milk market in NSW, which would increase the market power of the supermarket giant.

Dairy Farmers’ Trust in Coles Not High

A lack of trust in Coles’ purchase of key fresh milk dairy factories stems from its actions during the 2011 dairy downturn, according to the ADF.

In 2011 Coles introduced $1 a litre milk, sparking a price war between major retailers that lasted for nearly a decade and had huge ramifications in the dairy industry.

“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,” said Mr Gladigau.

“You’re now going to have a retailer that owns from the farm gate price right the way through to the shop shelf.”

Coles also provoked the dairy industry in 2019, when a promised “full amount” of a 10c a litre increase was supposed to be passed on to farmers via their suppliers.

It took a threat of legal action from the ACCC for Coles to make good on this promise and agree to pay dairy cooperative Norco $5.2 million.

In 2018, then Agriculture Minister David Littleproud slammed both Coles and Woolworths for using milk levies as an ‘empty media stunt’.

Coles Silent on Concerns

Coles hasn’t spoken on their purchase since releasing a statement to the stock exchange in July 2023.

“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.”

The ADF hasn’t 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,” Mr Gladigau 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.

Sources: ABC, ABC, Coles Group, ACCC, ACCC, Australian Dairy Farmers, Australian Dairy Farmers

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