Can we trust them? QDO takes on watchdog role following Coles' announcement.

Coles’ announcement that they intend to bypass processors and start a direct relationship with dairy farmers came as surprise to most within the industry and many are trying to determine what position to take. Given Coles’ previous history with the dairy industry, it is difficult to trust the intentions of the supermarket giant.

While Woolworths has had a direct relationship with farmers through Farmers’ Own, this brand competes with other premium branded white milks at a price point above $3 for 2 litres. Coles, however, intends to sell its farm direct milk as its private label.

Coles has previously committed to ensuring all of the additional 10c/L added to its milk price is passed through to farmers. It would be expected that this latest announcement will see dairy farmers who supply Coles receive 10c/L, or around $1.30/kg of milk solids, above previous prices they received.

In their statement, Coles cites its existing ‘successful’ direct producer relationships to show that this proposed model can work to provide health profit margins for both retailers and the farmers.

The 2018 ACCC report into the dairy industry identified the imbalance of power within the value chain as the key to the failure of the dairy industry. The Mandatory Code of Conduct for the dairy industry, that is currently being drafted as a direct result of this report, seeks to address the imbalance of power between farmers and the processors.

As individual small business owners, farmers have struggled to negotiate with multinational processors for a fair farm gate price. One must question then, what hope an individual farmer will have to negotiate a fair and sustainable farmgate price when they go up against the might of Coles.

 The fact is that Coles is capitalising on consumer sympathy for the dairy industry. The massive support that consumers gave dairy farmers during last year’s Drought Relief campaign has prompted Coles to use this to boost sales of its discount product lines over branded milks. Consumers will undoubtedly believe that this new arrangement has been designed to benefit the farmer and therefore support it.

 “At this stage, the nuts and bolts of how and what this relationship and process will look like is pure speculation, with only Coles knowing truly what its intentions are” said QDO Executive Officer, Eric Danzi.

 “We need to work with the supermarket giant to increase the RRP price of fresh milk to pre-2010 pricing. In today’s market that would equate to around $1.50/L. which would allow farmers to receive a fair farmgate price.

 What we need to ensure is that this does not give Coles even more power over dairy farmers and does not allow Coles to revert to $1/L pricing”.

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Coles to cut out milk processors, and deal directly with dairy farmers.

Coles has announced it will bypass processors and contract milk directly from dairy farmers in NSW and Victoria from July 1.

Key points:

  • From July 1, Coles will bypass milk processors and deal directly with farmers in NSW and Victoria

  • Coles has not revealed a price, but says it will be a "competitive farm gate price"

  • The cost of homebrand milk will remain unchanged, despite the deal

In the past, Coles has used processors to source milk for its homebrand products, with Norco contracted in NSW and Queensland and Saputo sourcing milk from Victoria and Southern NSW.

The new model will offer longer term contracts that allow farmers to choose from one, two or three-year contracts.

It marks a shift to a model more in line with competitor Woolworths, where the supermarket will be able to offer a direct price to farmers.

Coles chief operation officer Greg Davis said in a press release it would offer a "competitive farm gate price", but did not specifically reveal a price.

"In addition to offering a fair and competitive price, dairy farmers will have more choice regarding the length of contract and more certainty around income," he said.

"If the model works as we hope it will, we will look for opportunities to expand the footprint to other milk-producing regions and potentially other products in the dairy case."

The ABC understands Coles representatives have met with farmers in Victoria over the past few months.

Coles said it would also contribute an additional $1.9 million for research into the Coles Sustainable Dairy Development Group.

The cost of homebrand milk for two and three-litre milk will remain unchanged at $2.20 and $3.30 respectively.

President of farm group Dairy Connect, Graham Forbes, said Coles appeared to be adopting a model common among UK supermarkets such as Tesco.

It was unclear how Coles contracts and pricing would be structured, however some farmers were hopeful long-term contracts would help give them more security.

Coles said it would offer a guaranteed price for two years and a floor price for the third year.

"It will put a bit more competition out there in the marketplace, and let's hope it lifts the price to farmers and gives them some long-term security," Mr Forbes said.

"It will be very interesting to see how it impacts on Saputo suppliers currently in NSW.

"There is a lot of competition from Parmalat at the moment, Lion has been a bit quiet while it's up for sale, but it will be a very interesting few weeks to see how the processors respond."

David Inall, representing Australian Dairy Farmers, said he was surprised by the announcement.

"It came out of the blue, it's early days, we're not aware that any farmers are contracted to Coles at this stage, but we look forward to more detail around contract and prices," Mr Inall said.

"They have told us that they will offer a price that they believe will be in the top quartile of what is currently on offer, which is certainly an encouraging sign, which will make it very competitive."

Mr Inall expressed concern that this could lead to a return to $1 per litre milk.

"But we'd also expect that this will not see a return to $1 per litre milk, that they have not created this model to slide back to $1 dollar per litre milk — that's a debate we don't want to have again," he said.

Processors face fierce competition for milk

According to food industry analyst and director of Fresh Agenda, Joanne Bills, there were reasons why supermarkets were moving to deal directly with farmers.

"In the UK supermarkets have found that you can add transparency to the supply chain and also implement specific processes, standards, or animal welfare requirements," she said.

"But in Australia it could be looking to avoid some of the fallout from the $1 per litre milk, similar to the way that Woolworths has with its 'Farmer's Own' brand."

Ms Bills believed that, while the fresh milk market represented only a fraction of the Australian dairy industry, the move to deal directly with farmers would add new competition and complexities for processors.

Coles declined an interview with the ABC.

Source: ABC News

Coles faces further backlash for refusal to lift the price of milk.

A fourth-generation dairy farmer says he would prefer to give his milk away for free than sell it as a loss for the benefit of the major supermarket.

Dairy farmers are so “angry and disappointed” with Coles for refusing to hike its milk price he is threatening to tear up his contract with processor Norco.

Woolworths announced earlier this week it will add an extra 10 cents per litre to benefit struggling farmers who would receive “every cent” of the price increase.

But Coles resisted calls to follow its rival, citing cost of living pressures on customers when defending the company’s decision.

Paul Weir, a fourth-generation dairy farmer in northern NSW, is in the top 10 per cent of Norco’s producers with a supply of 2.5 million litres of milk a year, the ABC reported.

The cooperative is contracted to process milk for Coles.

“Full credit to Woolworths for doing it, but words can’t describe how angry and disappointed we are with Coles’ stand,” he told the national broadcaster.

“We’re in one of the worst droughts in history, milk’s dropping down to one of the lowest records in a long time, and everyone around here is doing it tough, feed costs have gone through the roof.

“The fundamental problem is that it’s well under the cost of production, and if this industry is going to be sustainable we need a price rise across the whole dairy cabinet — milk, cheese, yoghurts, butter, the whole lot.”

Mr Weir told the ABC he had contacted Norco asking for an early release from his contract unless the major supermarket changes its tune on the price of milk.

“Their business values and mine just don’t agree, I choose not to do business with people like that and I don’t want any of my milk going through a Coles for them to make profit out of it while I’m sitting here making a loss on it.

“I would much prefer to give my milk away in front of a Coles shop then actually let Coles sell it as a loss just for them to profiteer on it.”

Rather than lift the price of milk, Coles said earlier in the week it would be collecting donations for dairy farmers and matching every dollar raised from Monday.

“One thing I can’t do as CEO of Coles is disadvantage our customers at a time when clearly they’re under household budget strain,” said Coles chief Steven Cain after handing down the company’s first half-year result on Tuesday.

“We’ve been one of the main supporters of farmers, we’ve distributed nearly $16 million so far, but it’s important that we don’t disadvantage Coles customers.”

"Woolworths is getting rid of $1 milk. It’s time Coles and Aldi got behind dairy farmers and did the same.

Federal Agriculture Minister David Littleproud on Tuesday took the drastic step to call on shoppers to boycott both Coles and Aldi for refusing to lift the price of its budget milk.

He accused the supermarket chain of “pretending” to be a decent corporate citizen and Aldi of “hiding under the stairs”.

Dairy farmers struggling with drought needed an end to Australia’s “$1 milk disaster”, he said, a price war that began eight years ago and has been blamed for sending some farmers to the wall.

“Publicity stunts like (Coles) asking shoppers to donate at the counter to help struggling farmers are just a smoke screen to hide the fact they pay bugger-all for milk,” Mr Littleproud said.

“The farmers wouldn’t need donations from the public if Coles and Aldi paid fair prices.”

A Coles spokesperson told news.com.au that it continues to support the dairy farming industry.

“Coles has been exploring additional options in relation to how to best support Australia’s hard working farmers, including how we ensure that drought assistance initiatives are as efficient and effective as possible,” the spokesperson said.

“Coles is committed to finding a better model that can be adopted by the industry to assist Australian farmers, and intends to liaise with relevant parties including government and the ACCC.”

Source: News.com.au

In the News: Dairy farmer’s online campaign to end $1 milk draws attention.

Damien Tessman.jpg

A DAIRY farmer’s online campaign urging Coles and Aldi to abandon their cheap milk prices is gathering speed.

Fifth-generation dairy farmer from Kingaroy, Damien Tessmann, started the campaign to get Coles and Aldi to end $1-per-litre milk prices “through the power of social media”.

After Woolworths ended its $1 milk prices last week, there has been a strong call for the other big supermarkets to follow suit.

Kingaroy dairy farmer, Damien Tessmann, has started an online campaign urging Coles and Aldi to end $1-per-litre milk. Picture: contributed

Mr Tessman started the Facebook group C’mon Coles, where he shared a video calling for other dairy farmers to share their stories, and urged consumers to boycott Coles and Aldi.

Across all media platforms, the video has been viewed hundreds of thousands of times.

“I think it’s one of these things where it’s important to be grassroots and farmer driven,” Mr Tessmann said.

“I want to do something to communicate with consumers and to make sure they vote with their wallets.

“It really is that David-and-Goliath battle.

“It’s (the response) really been overwhelming and it’s really about keeping that pressure on. I think people really do want to help farmers, I don’t buy into that city/country divide.”

The Likes on the C’mon Coles Facebook page have been growing organically, according to Mr Tessmann.

“It’s started off here in Kingaroy and I often look at (Facebook) notifications of where people are coming from. There was one this morning from Western Australia.

“It’s really great that we’ve got this far from just a farmer posting a video.”

Mr Tessmann and a group of other dairy farmers took a cow and stood outside Aldi in Kenmore, talking to consumers.

Damien Tessmann, Susan McDonald, Craig Brook, and Brad Teese with Dianne the jersey cow outside Aldi in Kenmore. Picture: contributed

Damien and co.jpg

“All demographics had positive things to say about the dairy industry and our cause,” he said.

“It really warms my heart that consumers in metropolitan Australia want to help us out.”

Mr Tessmann has been in the dairy industry all his life.

“It’s something that consumes you,” he said.

“When you’re on the land in a particular industry, you become really passionate about it.

“Dairy farmers are renowned for being on the shy side, so it’s great to see farmers getting passionate and involved and that’s what’s keeping me going.”

The C’mon Coles Facebook page has received 1600 Likes so far.

Kilcoy dairy farmer, Ashley Harrison, has also gotten behind the campaign and shared a video on the page.

But Mr Tessmann said other diary farmers had been hesitant.

“There has been some reluctance from Norco suppliers,” he said.

“It’s horrible that they think there will be a backlash from Coles if they openly jump on this campaign.

“That’s been the feedback from half a dozen farmers.

“I think that’s really sad about the state of the dairy industry.”

Mr Tessman said the next step in the campaign was to keep the momentum going.

“It’s about keeping that pressure on, but it all comes down to consumers. They’re our biggest weapon in this battle.

“It’s been a deafening silence from Coles. We’ve been tagging them in all our posts.

“Woolworths responded and said ‘thank you for your support and we understand how important the dairy industry is’.

“Coles can’t even return a tweet to say ‘this is what we’re doing’.”

Source: CASSANDRA GLOVER, Rural Weekly

Retailers must do the right thing by dairy farmers.

For nearly a decade, dairy farmers have been wearing the pain caused by discounted products, whether it’s $1 per litre milk or cheap cheese.

I remember when the first $1 per litre products went on supermarket shelves on Australia Day, 2011 and the outrage caused by the resultant “milk wars”.

Prior to this marketing campaign, the last time milk was $1 per litre was around 1992. But in 2018, it’s impossible to live on a wage set at 1992 levels.

Now there is momentum to turn things around and give value back to the dairy supply chain.

Some supermarket chains have announced plans to help drought-affected dairy farmers.

Woolworths plans to introduce a special range of milk priced at $1.10 per litre in mid-October. Homebrand 2L and 3L milk products are currently on shelves for $1.10 per litre until the drought-relief milk product launches.

Coles is now selling its 3L Own Brand milk products for $3.30, with the money collected to be distributed back to farmers via a fund with an application process.

Both have been upfront about the fact that their initiatives are only short-term measures that aren’t intended to solve the problem of discounted dairy products.

As President of Australian Dairy Farmers, I represent farmers all across the country. Many are calling me asking how they are eligible to receive a fair price from either of these plans.

The problem with both plans is that many regions of Australia affected by drought with high production costs impacting thousands of dairy farmers, yet most of those farmers won’t be able to claim a benefit from either initiative.

Coles has encouraged any dairy farmers to apply for a grant through their fund, but those in drought-declared areas will be given priority, while

Woolworths intends to distribute the extra 10c from their drought-relief milk back to farmers via their processor.

While I support measures that see farmers paid a reasonable price for their hard work and dedication, I must ask, “Is this really the best we can do?”

Certainly ADF and our state dairy farmer organisations believe all dairy farmers must see a benefit from any increase in retail milk prices.

Farmers put tireless effort and resources into producing a quality product. And it leaves a deep and lasting impact to see your hard work sitting on a supermarket shelf for less than the price of water.

This pricing practice is not viable and we urgently need a shared solution to assist in building the long-term sustainability of Australian dairy farmers.

Ultimately, we must push for a permanent end to discounted dairy products, whether it’s $1 per litre milk or cheap cheese.

There is a groundswell of support for farmers hit hard by the drought and supermarkets have the best opportunity to scrap their discounted dairy products right across the breadth and depth of the dairy cabinet.

The supermarkets know what farmers want. They know what they deserve. It’s now time for them to take a big step forward and do the right thing by ending this pricing practice.

But until that time comes, I encourage the public to help dairy farmers by continuing to buy branded dairy products.

Source: - Terry Richardson, ADF President

Norco farmers betrayed by Coles' response to 10 cent / litre Drought Levy.

Yesterday saw both major supermarkets announce that they would put the 10 cent / litre Drought Levy on, but only for their 3L home brand milk.

This was a clever tactic. Why? Because singling out the one product that larger families with the most pressure on household budgets for the levy increase, means it is likely many will not purchase the Drought Levy product and will simply opt for the still discounted 2L option.

But what has been the biggest betrayal to the levy and its supplier of home-brand milk is Coles’ announcement that the levy would be handed to the National Farmers Federation (NFF) instead of giving the 10-cent levy directly back to Norco to distribute to its farmers.

The question must be asked to Coles – why have such a convoluted process of giving the 10 cents back to the dairy farmers rather than allowing Norco, a farmer-owned coop, to distribute the levy back on a per litre basis?

The reason is clear, by having the NFF manage the levy, Coles can pull the levy much faster than if it was managed by Norco.

Coles, give the drought levy funding to Norco, and other processors who supply your milk, and allow them to distribute it fairly to farmers.

In its statement, Coles announced that they would apply the levy on its 3L home brand until Christmas. To have any impact the Drought Levy needs to stay on all fresh milk until we know our farmers are out of drought and are back on their feet.

Woolworths, while also announcing the 3L home brand range levy, has at least been in direct negotiations with its processor, Parmalat. Woolworths announced that the money raised will go to its supplier, Parmalat, which will then distribute it on a monthly basis among the farmers who supply Parmalat. QDO Executive Officer Eric Danzi will also be involved on an audit committee to ensure full transparency of the 10 cent/litre levy going back to Parmalat suppliers.

As much as we don’t like hurting our Norco farmers, we ask the public again, boycott Coles until they come to the party on all brands and all sized milk bottles and work with Norco on distributing the levy back to its farmers.

This issue will not go away until we get the Drought Levy applied to all milks, all sizes and in all states.