That Coles chief executive John Durkan has more front than a Wesfarmers-owned supermarket chain! He’s launching a new discount milk, which will retail «at a slight premium» to Coles $1 private label milk, but 20¢ of each sale will be returned to Victoria’s dairy sector.
He might as well post every Australian farmer half a Musk stick and a ball of bellybutton lint.
Under an identical scheme in South Australia and Western Australia, Coles has handed back an immaterial $200,000 each year since its introduction in 2012. That wouldn’t even cover the clawback payments – recently foisted on Murray Goulburn suppliers for FY2016 – owed by two average farms. Two! And MG has more than 2,600 farmers. Wethinks Durkan has to be taking the piss.
Because how did we get here? Let’s take the scenic route, shall we?
Durkan arrived in Australia in 2008 as part of Ian McLeod‘s turnaround team for Wesfarmers’ newly-acquired asset. The Pom and the Scot referred to this market as «Treasure Island» for the easy margins here to be plundered from their suppliers.
And plunder the company did! Just ask competition tsar Rod Sims, who successfully prosecuted Coles in the Federal Court for «serious, deliberate and repeated» cases of «misusing their bargaining power». For this conduct towards its suppliers, Coles was ordered in December 2014 to pay $10 million in penalties.
In the domestic dairy sector, more specifically, Coles has mercilessly squeezed the industry value pool in aid of $1 milk to drive foot traffic and thus sales of the company’s higher-margin goods. Coles locked a starry-eyed Gary Helou into supplying its private label milk (for 10 years) and cheese (for five years) at barely break-even terms. And to service those contracts, Gary the Great had to spend $300 million of borrowed capital on three processing plants. The bank interest (let alone the principal) has contributed to MG’s current cashflow crunch, and the Sydney milk plant has already been sold and leased back from the Commonwealth Bank.
Durkan arrived in Australia in 2008 as part of Ian McLeod‘s turnaround team for Wesfarmers’ newly-acquired asset. The Pom and the Scot referred to this market as «Treasure Island» for the easy margins here to be plundered from their suppliers.
And plunder the company did! Just ask competition tsar Rod Sims, who successfully prosecuted Coles in the Federal Court for «serious, deliberate and repeated» cases of «misusing their bargaining power». For this conduct towards its suppliers, Coles was ordered in December 2014 to pay $10 million in penalties.
In the domestic dairy sector, more specifically, Coles has mercilessly squeezed the industry value pool in aid of $1 milk to drive foot traffic and thus sales of the company’s higher-margin goods. Coles locked a starry-eyed Gary Helou into supplying its private label milk (for 10 years) and cheese (for five years) at barely break-even terms. And to service those contracts, Gary the Great had to spend $300 million of borrowed capital on three processing plants. The bank interest (let alone the principal) has contributed to MG’s current cashflow crunch, and the Sydney milk plant has already been sold and leased back from the Commonwealth Bank.
