The supermarket chain says proceeds from the as-yet-unnamed brand will go to an independent dairy industry fund to provide direct support to farmers and “invest in innovation to ensure the long-term future of the dairy sector”.
Coles kicked off the so-called milk wars in 2011 with its $1-a-litre home brand milk, forcing rival Woolworths to follow suit.
The fund will put money into the pockets of more than 2600 dairy farmers in NSW and Victoria, who are facing financial ruin in the face of collapsing commodity prices.
Fonterra and Murray Goulburn have both cut the price they pay farmers for milk solids.
Coles, which says it will forgo any profit on sales of the new brand, will also contribute $1 million to create a sustainable dairy industry fund to administer the initiative.
“It’s important that we have a vibrant dairy farming sector, and we can only have that if we work together to ensure the long term health of the industry,” Coles managing director John Durkan said.
Coles has similar partnerships with dairy industry groups in South Australia with SADA Fresh milk and in Western Australia with WA Farmers First milk.
The supermarket will meet with farmer representatives and dairy processors, including the Victorian Farmers Federation and Australian Dairy Farmers, this week to discuss the new brand, which is expected to be on shelves in around three months’ time.
Australian Dairy Farmers president Simone Jolliffe was cautiously optimistic about the proposal, but said the organisation would use the discussions with Coles to raise the broader issue of cheap milk.
“We need to fully understand the details around what Coles is offering. We’re certainly keen to hear what that is and how it’s going to help farmers,” she said.
“We’ve always advocated for consumers to buy branded milk and advocated strongly against dollar-a-litre milk. If there’s an opportunity to add value to the chain, farmers would welcome that. They’d certainly welcome revisitation on the private label [pricing issue].”
Last month, dairy processor Murray Goulburn outraged farmers by announcing it would slash the milk price it pays to its 6000 farmers by as much as 15 per cent to as low as 35c a litre, which for many would mean taking a loss.
Mr Durkan told The Australian he was disappointed by the cuts.
“I’m disappointed it was so sudden that the new pricing was announced,” he said.
“That’s what I’m really disappointed about because farmers will have been banking on something else and all of a sudden they get a hit to their livelihoods.”
Jessa Fleming, who runs a 420-acre dairy farm in Gorae West on Victoria’s southwest coast with her husband, said the milk price cuts announced at the end of April had been devastating.
“Before costs we’ll be receiving 39 cents a litre,” she said. “For us to be able to service our loan repayments and feed our animals, it would have to be at least 45 cents.”
Before the collapse in prices, the Flemings were receiving $5.60 a kg for milk solids which went to the export market. She said at that price they were able to service their loan repayments for six to eight months of the year.
Ms Fleming said Murray Goulburn’s sudden cuts forced them to cull their milking herd down from 300 to around 260 because it was no longer profitable.
“To know these girls have put their trust in you and your care, and to have to get rid of them even though they’re still producing milk because it’s no longer profitable, it was awful,” she said.
She too was cautiously optimistic about the Coles announcement but said cheap milk was a bigger issue. “I find it interesting that they’ve only come out with this since all the struggles have hit the headlines,” she said.
“Farmers and producers have been saying from the very start of the milk price wars that the low price is not sustainable, and we were just told as suppliers that long-term it would be OK. Obviously it’s not.”
Australian consumers need to accept that cheap milk is not sustainable, she said. “We just want to be paid a fair price. We’re not looking to make a million bucks.”
The initial $1 million investment will come from the $50 million Coles Nurture Fund, which is set up last year to support innovation in the agricultural sector.
It comes after disgruntled investors filed a lawsuit against Murray Goulburn for allegedly misleading investors when the dairy producer partially floated on the share market in mid-2015.
The lawsuit, lodged with the Victorian Supreme Court on Monday, alleges the dairy producer made “misleading or deceptive statements” about its revenues and expected income.
The Australian Competition and Consumer Commission has also announced it will investigate the milk pricing issues in the dairy industry.
frank.chung@news.com.au