Coles has made the decision to increase its milk price on Friday afternoon, following Aldi and Woolworths’ 10 cent increase on the price per litre to reflect a rise in farmgate prices.
Dairy Connect CEO Shaughn Morgan called on Coles to follow the other retailers on Friday morning and highlighted the importance of passing the increase to the dairy farmer.
A spokesperson for Coles told Inside FMCG on Friday afternoon that it made the decision to increase the retail price of its Coles Brand milk, “following a review of market conditions and rising cost pressures across the industry”.
“Starting from 27 July, Coles will begin moving the price of Coles Brand milk sold in Coles supermarkets and through Coles Online,” the spokesperson said.
Coles 1 litre is currently retailing (Friday July 26) at $1, its 2 litre is priced at $2.20 and the 3 litre is at $3.30.
From Saturday Coles will match Woolworths’ prices for its own brand milk range. Its 1 litre plain white milk will retail at $1.29, the 2 litre will retail at $2.39 while the 3 litre will be priced at $3.59.
This month the retailer began sourcing milk directly from farmers for its Coles Brand milk, bypass milk processors. Under the new system, Coles pays dairy giant Saputo to process and bottle under a toll processing agreement.
The grocery has offered longer-term contracts to the dairy farmers with the option to choose from one, two or three year contracts.
Dairy Connect CEO Shaughn Morgan said the impact of the drought and soaring energy costs is making it especially difficult for dairy farmers currently.
“The farmgate price is below cost of production. It is vital for the sustainability of the Australian dairy industry that dairy farmers receive a farmgate price that is above the cost of production,” Morgan said.
Rabobank’s latest Global Dairy Quarterly stated competition for milk among dairy companies was driving “record-high opening and forecast closing milk prices in 2019/20.”
On Wednesday Aldi announced a 10 cent per litre increase to the retail price of its entire fresh milk range as a direct result of the recent increase in the farm gate milk prices agreed between its milk suppliers and dairy farmers.
The discount grocer said that it will ensure that the full benefit of the increase is passed on to dairy farmers.
“We will continue to maintain the collection and distribution of 10 cents per litre implemented earlier this year and ensure that the proceeds are passed onto dairy farmers in full,” a spokesperson for Aldi told Inside FMCG.
“We do not take price increases lightly, however these movements are necessary for building a long term sustainable Australian dairy industry.”
In February, Woolworths was the first national supermarket to scrap $1 per litre pricing on milk, with Aldi and Coles later following suit.
A Woolworths spokesperson said the measure provided confidence “immediate relief” to dairy farmers given there had been little to no increase in farmgate prices for some time.
The Australian retailer was quick to follow Aldi’s move this time around, also increasing its retail price by 10 cents per litre as a result of the “ongoing whole-of-market cost pressures”.
“Since February we have seen farmgate prices increase significantly and they’re forecast to continue rising throughout the year,” the spokesperson said.
“As a result of these farmgate price movements, we have been paying our suppliers even more for milk and other dairy products across the category over recent months.”
