Coles Express cuthroat price will hurt dairy farmers and corner stores

Posted on Wednesday, January 09, 2013 - Category: In the News

The announcement today by Coles that it is once again devaluing milk as a product by cutting the price of home brand milk in Coles Express stores to $1 per litre is yet another example of it selling milk at unsustainable prices.

“Dairy farmers and their families are already suffering from the unsustainable price cuts by Coles on home brand milk,” said ADF President, Mr Noel Campbell.

“This latest marketing tactic, that appears to be aimed at driving out the family corner store and removing these small competitors to Coles, will impact on dairy farming families across Australia, particularly those in Queensland, New South Wales and Western Australia, where the majority of milk produced is used as drinking milk,” Mr Campbell said.

“Milk priced at $1 per litre is simply unsustainable and does not give a fair return for dairy farmers and others in the supply chain.”

“It takes a lot of effort to produce, refrigerate, transport, process, distribute and deliver fresh milk on a daily basis. This is especially the case for convenience stores such as Coles Express and prices should reflect this effort,” said Mr Campbell.

Every major milk processor has come out and said that they are making no money on home brand milk products – this includes those that supply Coles.

Wesfarmers, the owner of Coles, last annual report showed that Coles earnings were up 16.3% on the previous year. Since 2008, Coles margins have risen from 3.3% to 4.6%, despite the price cuts. Clearly Coles is making money and doing all right off the farmers back.

They claim they gave the milk processors a price increase to offset any losses but processors are still losing money on milk and this is flowing through to farmers in their contracts in the form of lower prices.

In the drinking milk states of Queensland, New South Wales and Western Australia this has seen some farmers losing up to 3-4 cents per litre on their contracts, wiping out any profit margin.

“At ADF we are looking for solutions and talking to all sides of politics to balance the immense market power of the major retailers and ensure fairness for their suppliers and farmers,” said Mr Campbell.