SUPERMARKET giant Coles has set itself a target of buying more than 90 per cent of its lamb kill direct from farmers and feedlots.

Coles merchandise director John Durkan said streamlining the company's beef supply chain had delivered big savings, and it wanted to do the same with lamb.

"We used to buy boxed beef and had up to 70 suppliers. We've changed the model considerably and now buy 95-98 per cent of our beef direct," Mr Durkan said.

Coles now deals with as few as five beef suppliers on a regular basis.

Mr Durkan said making its food-supply chains more efficient, rather than paying farmers less, was the reason Coles had been able to cut the price of food items, such as the controversial $1 a litre for milk.

He said Coles had been able to save its customers $800 million a year in food costs by revamping its business. He described the supermarket chain's meat supply system as "woeful" when he joined the business from the UK in 2008.

"We were able to take efficiencies and pass them on to consumers," he said.

Mr Durkan said Coles was keen to re-model its lamb supply network, which is currently heavily reliant on the saleyard auction system.

He said Coles bought 1.5 million lambs a year for its stores, but only 56 per cent of its lamb kill was currently sourced direct from farmers and lotfeeders.

"We are on the move to get well into the 90 per cent (range) in terms of lamb supply," Mr Durkan said.

Based on Mr Durkan's figures, Coles is presently buying about 840,000 lambs direct from farmers and feedlots.

To lift this to more than 90 per cent the company would have to buy 1.35 million lambs direct each year.

He said Coles bought 500,000 cattle a year, with up to 490,000 now bought direct.

Mr Durkan also said dealing direct with suppliers was the "only way" for Coles to control the quality and consistency of its fresh food.

He said Coles wanted to see farmers make a profit.

"Our aim is to have a viable producer family - we can't have an industry on its knees."

But he said the direction that Coles took to satisfy its customer demands didn't always "align" with those involved in the food production chain. He cited the supermarket's move to HGP-free beef as a case in point.

"How the meat industry wants to produce meat (using HGP's for improved feed efficiency and less carcass fat) and what the customer wants doesn't always align."

Mr Durkan said Coles had achieved "double digit" growth figures for beef sales since going HGP-free.