THE dairy industry has had a tumultuous 12 months, due mainly to Coles, writes SIMONE SMITH
For Australia's dairy industry, the past year started with Coles. And ended with Coles.
Tomorrow is the 12-month anniversary of the supermarket milk price war, when Coles dropped its house-brand milk to $1 a litre.
Other supermarkets followed suit and the move infuriated Australian Dairy Farmers.
This time last year, ADF said the house-brand price slash could drive farmers out of the industry in the regions most exposed to the drinking-milk market - Queensland and NSW.
An Australian Competition and Consumer Commission inquiry and a Senate Inquiry followed and, as predicted, some farmers left the industry in those regions - thanks to a combination of lack of price security, floods and cyclones.
But it hasn't been all bad news for Coles - or the dairy industry.
Last week, its merchandise director John Durkan stood beside ADF president Chris Griffin and southwest Victorian processor Warrnambool Cheese and Butter chief executive officer David Lord at the Allansford factory.
Together they announced an exclusive joint venture between Coles and WCB called Great Ocean Road. It's worth 50 million litres of milk and WCB has promised more jobs and investment when products the hit shelves in May.
In September, Coles partnered with NSW-Victorian processor Bega Cheese in a deal worth an extra 70 million litres of milk.
In the next month, Bega will begin supplying Coles' 19,000-tonne house-brand cheese contract. Previously more than 9000 tonnes of this contract came from New Zealand. But this is cold comfort for Queensland Dairyfarmers' Organisation president Brian Tessmann.
"It is interesting Coles are doing deals in places that are the least affected (by the home-brand price cut) and basically ignoring the places that are most affected," he said.
Queensland has lost between 25 and 30 dairy farmers in the past 12 months.
Farm-gate price cuts that started at the end of 2010 thanks to the price war, have varied in value upwards of three cents a litre and have been a large part of the Queensland dairy industry's "crisis of confidence", according to Mr Tessmann.
Mr Tessmann said the state's 560 farmers would have to supply twice the amount of milk they were producing (the state produced 485.4 million litres last year, according to Dairy Australia) to meet an expected population increase of about 25 per cent in the next decade.
ADF president Chris Griffin said the supermarket price war and the deal between Coles and WCB were two different issues.
"Nothing has changed in the drinking milk area, they are still selling milk at $1 a litre, still selling milk at an unsustainable price," he said.
Mr Griffin hopes the Government will implement an enforceable code of conduct for supermarkets and wants a supermarket ombudsman or commissioner to enforce the code and investigate complaints.
He said the WCB deal, with branded cheese and fresh milk, was what he would like to see more of between supermarkets and dairy processors.
"It's a contract signed off with a price where everybody in the supply chain can get a fair return," Mr Griffin said.
Coles spokesman Jim Cooper said customers had responded "very strongly" to the supermarket offering value on staple items such as milk and bread and it had "no plan of changing its home-brand milk pricing".
Branded product "was nothing new" for Coles, according to Mr Cooper, and the joint venture with WCB was about providing a range.
WCB managing director and chief executive David Lord said the deal was "incremental business" for the processor and, while increasing the domestic branded side of the business was important, maintaining the 65 per cent export and 35 per cent domestic balance was also crucial.
Mr Lord couldn't say how much the venture would contribute to the farm-gate milk price, however, he said it would improve the company's financial position. "Only profitable processors can pay good prices," he said.
Previously, WCB sold cheese in the US under the Great Ocean Road brand and Mr Lord said this five-year deal with Coles was exclusive, unlike agreements it has regarding its fresh milk brand Sungold.
The 50 million litres needed for Great Ocean Road would be filled by the 30 new suppliers that joined WCB since the start of the season and "organic growth" from current suppliers.
