Coles signs up Harvey Fresh

The decision by Coles to award Harvey Fresh a three-year home brand milk contract is not a victory for the WA dairy industry.

Previously, WA processor Brownes filled Coles private label milk contract in WA, but starting in October Coles’ home brand milk will be supplied by Harvey Fresh.

WAFarmers dairy section president Peter Evans said it was really just transferring a low margin milk contract from one supplier to another.

“Brownes will now have to find a new home for 20 million-plus litres of milk while Harvey Fresh has found a home for 20 million-plus litres of milk — it’s not like the industry has been given a new market, ” he said.

“It is good news for Harvey Fresh and their former Challenge dairy suppliers with milk prices now at parity for all its suppliers.”

Mr Evans said there was little consolation in Coles also announcing it would work with Brownes on developing a range of value-added Coles dairy products because low margins would unlikely be of benefit to processors. Coles chose to announce it had awarded Harvey Fresh the home brand milk contract at last week’s WAFarmers Dairy conference in Busselton, creating concern among farmers who are already facing uncertainty over Coles $1/litre home brand milk campaign.

Mr Evans said Coles was unrepentant about its milk discounting and even suggested it was positive for the industry by boosting milk sales.

“All spin aside, Coles needs to understand that their milk discounting strategy will inevitably harm dairy farmers in the long run, ” he said.

“Farmers have already seen the wholesale prices they are paid for milk decrease over time and the current situation of milk retailing for only $1/litre clearly does not accurately reflect the hard work and long hours that are put into producing that milk.”

Coles merchandise director John Durkan told conference delegates that Coles’ low price home brand milk would not lower farm gate milk prices.

He said Coles’ awarding Harvey Fresh its home brand milk contract would instead build a more sustainable dairy industry in WA.

Mr Durkan said Brownes Dairy would continue to supply Coles with Brownes-brand milk and Coles would also work with Brownes on plans to produce a range of value-added dairy products in WA, including Coles-brand cream, yoghurt and sour cream which are now manufactured interstate.

Brownes general manager Tim Cusack said the loss of the Coles private label milk contract would provide short term challenges, but the company was committed to its next 12 months of milk prices announced earlier this year.

“We have a large processing facility at Brunswick, our challenge now will be utilising this facility and finding where to put this excess milk as well as excess spring milk solids, ” Mr Cusack said.

Harvey Fresh marketing and sales director Kevin Sorgiovanni said that winning the big Coles contract was a significant milestone for the company.

He said the contract ensured volume and certainty for Harvey Fresh and its suppliers, providing a platform to pursue new market opportunities.

Mr Sorgiovanni said the contract had also enabled the company to implement a single milk pricing structure for its farmer suppliers, offering farm gate price increases to farmers who had previously supplied the failed Challenge Dairy Co-operative.

Harvey Fresh is now looking to expand its supplier base to meet the new market opportunities arising from the Coles contract.

The commercial terms of the supply contract are confidential, but Mr Durkan said the agreed milk price was “no less” than the previous price paid to Brownes.