Supermarket giant Coles announced on Wednesday that it will begin sourcing milk directly from farmers next month for its Coles Brand milk.
The retailer will bypass milk processors and source the milk from farmers
in Victoria and Southern and Central NSW and will pay dairy giant Saputo to process and bottle under a toll processing agreement.
The grocery will offer longer-term contracts to the dairy farmers with the option to choose from one, two or three year contracts.
The new contracts will offer “guaranteed prices for two years and a floor price in the third year with flexible options of supply”.
Coles believes the new system will provide more value to local farmers withbetter farmgate prices and a more stable source of income. The grocery giant previously relied on dairy processors to buy milk from Aussie farmers, saying the contracts allowed the processor and not Coles to set the farmgate 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,” Coles chief operating officer Greg Davis said.
“Over many years, Coles has developed direct relationships with thousands of meat, seafood and fresh produce farmers supplying to our stores; it is a successful model, and we think it can work in dairy too.”
The price of Coles Brand milk will remain the same and the supermarket will continue to pass on the price increase benefit to processors in other regions for distribution to farmers.
If the model works as the retailer hopes, it will look to expand the contracts to other milk-producing regions and potentially other dairy products.
Coles is also investing an additional $1.9 million through its Sustainable Dairy Development Group to help improve sustainability of the industry.
The investment will fund research into more sustainable farming practices, new technology, more efficient use of pasture, feed and water; support for business development and talent retention to farmers gaining direct voice in how funds are deployed.
