After a successful roll-out of a direct milk supply model with dairy farmers in Victoria, Southern and Central NSW, supermarket giant Coles is expanding the model to South Australia and Western Australia.
Under the sourcing model for Coles Brand milk, the retailer deals directly with farmers on price, which was previously set by the processor.
Coles then pays dairy processors, including Lion Dairy and Drinks, Brownes Dairy and Lactalis Australia in SA and WA, to process and bottle the milk under a toll processing agreement.
The retailer said that the model guarantees farmgate prices for farmers, with the option of one or two year contracts and flexible supply options.
“By offering farmers the opportunity to lock in a price and giving them choice on the length of contract, Coles is investing in the long-term sustainability of our suppliers and the Australian dairy sector,” Coles chief executive commercial and express Greg Davis said in a statement.
Coles launched the milk sourcing model in Victoria and Southern and Central New South Wales last July in a bid to provide dairy farmers with a more stable source of income, amid devastating drought conditions.
Davis said business models to improve returns for dairy farmers are an important part of addressing the long-term structural issues facing the dairy industry.
“We are committed to investing in sustainable dairy farming, and the success of our direct sourcing model shows that it can make a real difference to our suppliers,” he said.
Coles has also established the Coles Sustainable Dairy Development Group
(CSDDG), leveraging its relationships with industry stakeholders to invests in on-farm sustainability measures.
Last week, Aldi and Woolworths said they would retain the drought levy on milk, after an interest body and Federal agriculture minister David Littleproud reiterated the importance of giving farmers a fair return.