Farmers and the nation’s competition watchdog have raised concerns about a deal that could see a major supermarket control a large part of the milk supply chain.
Key points:
- Dairy farmers are troubled by Coles’ bid to buy two Saputo milk plants in Vic and NSW
- The Australian Competition and Consumer Commission (ACCC) is set to investigate the potential NSW sale
- Coles has defended the deal but says it will work with the ACCC
Coles wants to buy two fresh milk processing facilities owned by Saputo, at Laverton North in Victoria and Erskine Park in New South Wales, for $105 million.
Each facility can process 225 million litres a year, and according to Coles they already process “Coles Own” brand 2 litre and 3L milk products.
But farmers are worried the deal will give Coles too much control over the milk price.
Australian Dairy Farmers president Rick Gladigau said his members were opposed.
“I think it’s extremely scary about what could happen through them owning basically from farm gate through to the retail level,” he said.
Raw milk concerns
The Australian Competition and Consumer Commission (ACCC) said Coles’ acquisition of the Victorian facility was unlikely to lessen market competition.
But ACCC 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.
Mr Gladigau agrees, given Saputo’s supply is low.
“They might just go, ‘For 20 million litres, we’re out of here’, and that’s another competitor out of the market.” he said.
The ACCC said any exit of Saputo from the market would be felt most strongly by farmers close to the Erskine Park Facility and could have also an impact on farmers in northern NSW.
Many dairy farmers have switched to supplying Coles, as the company is currently paying well.
“It’s fantastic that they’re paying a really good farmgate price, and they are one of the probably higher payers there,” Mr Gladigau said.
“But as we say, you’re paying it because you’ve got competition.
“What will you pay if you didn’t have competition?”
If Coles gets control of the supply chain, Mr Gladigau thinks discussions about price will be very different.
“They’re not negotiating a contract with anyone,” he said.
What next for this deal?
In a statement, Coles chief executive Leah Weckert defended the deal and said the company would work with the ACCC.
“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 to Saputo under a tolling agreement,” she said.
Farmers have until August 3, 2023 to make submissions to the ACCC.
Mr Keogh said if the ACCC believed there was a considerable risk, it could signal its intention to oppose the deal.
“That means potentially the matter would end up in the federal court,” Mr Keogh said.
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