NO IMPACT: Norco boss said he's confident that the move by Coles to bypass processors won't impact on their bottom line.
NO IMPACT: Norco boss said he's confident that the move by Coles to bypass processors won't impact on their bottom line. Norco

Coles milk moo-ve won't impact local dairy processor

DAIRY farmers who are part of Australia's largest co-op won't be impacted by a leading supermarket's decision to bypass processors and deal directly with producers, according to an industry leader.

Norco's acting chairman Greg McNamara said the announcement by supermarket giant Coles that it will bypass processors and contract milk directly from dairy farmers in New South Wales and Victoria from July 1, would not affect the dairy co-op.

It is understood Norco has a 60-million litre contract with Coles.

The leviathan supermarket said its Coles brand fresh white milk will offer, "fair and competitive farmgate prices and improved certainty of future income”.

Dairy farmers can decide between one, two or three year contracts with the supermarket through its new sourcing model which will also offer longer-term contracts.

Mr McNamara said Norco "have a good relationship with Coles”.

"There's no impact on how we will continue to be collecting, manufacturing and supplying Coles with milk,” he said.

"We will keep a watching brief on how this works.

"We need to be really careful when we talk to Coles about prices so there's no issue of commercial in confidence.”

It is understood the supermarket will pay dairy processor Saputo to process and bottle under a toll processing agreement.

In 2018 Saputo acquired the troubled Murray Goulburn's assets for $1.3 billion, plus its Coles housebrand contract, which is understood to still have five years to run.

Coles chief operation officer Greg Davis said they will also offer farmers contracts with guaranteed prices for two years and a floor price in the third year, with flexible options of supply.

Along with the new supplier-to-supermarket enterprise, Coles is also set to announce today an additional $1.9 million for its newly established Coles Sustainable Dairy Development Group.

The group funds research into the adoption of new technology, pasture efficiencies and business development.

The price of Coles Brand two and three litre fresh milk will remain the same under the new arrangement.

This news marks a shift to a model more in line with competitor Woolworths, where the supermarket will be able to offer a direct price to farmers.