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Pressure on Coles to up milk prices after Woolworths and Aldi add 10 cents

An Australian dairy industry advocacy body is calling on Coles to increase its milk prices following moves by Aldi and Woolworths this week to increase the price per litre by a further 10 cents to reflect an increase in
farmgate prices.

Dairy Connect CEO Shaughn Morgan welcomed the price increases but told Inside FMCG that it is “important” that Coles makes the move too.

“We’ve got to make sure that increase flows down to the dairy farmer,” Morgan said.

“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 the impact of the drought and soaring energy costs is making it especially difficult for dairy farmers.

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.”

From today, July 26, 1 litre Woolworths milk is selling for $1.29, the 2 litre milk is selling for $2.39, while the 3 litre is priced at $3.59.

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