Last month QDO wrote about the long-term issues caused by Coles’ tokenistic Dairy Drought Levy stunt. Of concern was the emotional and financial impact Coles’ convoluted payout system had on the Norco farmers who supply Coles’ private label milk.
Expecting that Coles would follow the Woolworths model and pay Norco the 10 cent levy to distribute, Norco farmers were dismayed when Coles announced that it would share the levy funds to any dairy farmer regardless of what brand they supplied.
So, while we were pleased for any farmer able to receive a share in the shopper generated funding, it was never going to be more than a publicity gesture.
Many were lured into thinking that Coles was being a responsible and caring corporate citizen, but in fact, all it wanted to do (and did) was relieve the pressure and complaints from shoppers who genuinely did and still do want to help our farmers by paying a fair and equitable price for milk.
Because of Coles’ disregard and disrespect for its contracted supplier, from mid-January, Norco was unable to match the farmgate price being paid by its two major competitors. This led to serious concerns that Australia’s remaining Dairy Co-operative may not be able to meet supply contracts, if its farmers were forced to go to another processor able to pay a higher farmgate price.
The good news released late last Friday, was that by creating some operational efficiencies, Norco has been able to increase its farmgate price to its farmers by 6.5c/L and is now on par with that being paid by Parmalat and Lion.
On top of Norco’s announcement last week was the news that the Australian dairy industry has waited for. Woolworths’ announcement that it would no longer sell fresh milk for $1/L but would increase its minimum price to $1.10 was a bold, brave move. It showed true leadership for them to stand alone and come out fighting for our farmers. Most importantly for our farmers is that the full 10c increase will be passed back to its suppliers via Parmalat.
This move was not about increasing profit. It was not about publicity. It was the Woolworths’ board, CEO, COO and CFO unanimously agreeing that having a floor price on milk, or any other basic commodity for that matter, was unsustainable and ultimately not in the best interests of the consumer.
Time and again, we see weather events causing short term scarcity in some of our favourite produce. Due to the one in 500-year weather event in the Townsville region, livestock and crops were flooded and lost. As a result, shoppers are feeling a significant pinch at the checkout or having to go without.
Coles constantly proclaims its strategic direction is always based on what’s good for the customer. We must ask: how can a discounting policy that is leading to permanent scarcity in supply caused by farm closures possibly be good for the consumer? Already the Queensland dairy industry is unable to meet our state’s fresh milk needs due to farms going out of business.
Unstable and unprofitable farmgate pricing and predatory pricing practices from supermarkets like Coles squeezes the profitability at all points in the value chain to the point of unsustainability. If Coles continues to ignore the needs of the dairy industry, it will face the wrath of shoppers forced to buy inferior and/or imported dairy.
As a Norco supplier myself, I am torn between the company whose private label contains the bulk of my milk or supporting a company that ultimately has the true and best interests of the dairy industry at heart. That’s why now, I pick Woolies.
