Coles-brand milk in NSW, Victoria to be processed in-house in $105m deal

Coles’ own brand milk sold along the east coast will be processed in-house after the supermarket secured approval to acquire two milk-processing facilities from Canadian-owned Saputo Dairy Australia for $105 million.

The two facilities, based in Victoria’s Laverton North and NSW’s Erskine Park, process about 225 million litres a year, 80 per cent of which is bottled as Coles’ two- and three-litre private-label milk.

Coles will acquire two of Saputo Dairy’s processing facilities, which brings production of own brand milk in-house.Credit:Bloomberg

The move will strengthen resilience in Coles’ milk supply chain and improve security of milk supply, said Coles chief executive Steven Cain, who described the facilities as state of the art and delivering exceptional production efficiency.

“These facilities also have sufficient capacity to facilitate further growth opportunities through new product innovation,” said Cain.

Saputo, which produces dairy products including Devondale, Cheer, Mersey Valley and Cracker Barrell, is Australia’s largest dairy processor. As part of the agreement, Saputo will continue processing its milk products at the two manufacturing facilities.

The announcement is expected to have little impact on customers.

The two sites’ 48 employees will receive offers to transfer their employment to Coles. Existing relationships with farmers will also not be affected by the acquisition.

Saputo Dairy put the two processing facilities up for sale in order to “further optimise its operating model”, the company said in a statement.

“As the Australian dairy industry landscape continues to evolve, this proactive measure aims to further adapt [Saputo’s] manufacturing network and is designed to strengthen our market competitiveness,” said Saputo international chief operating officer Leanne Cutts.

Saputo founder, president and chief executive Lino Saputo said the company wanted to strengthen its position as a high quality, low-cost processor.

“This marks an important step in executing our long-term vision for success in Australia as we maintain a sharp focus on efficiency to ensure we maximise the return on every litre of milk,” Saputo said in a statement.

The acquisition is still subject to approval from competition watchdog Australian Competition and Consumer Commission (ACCC) and is expected to be completed later this year.

In 2018, the ACCC expressed concerns about Saputo’s attempt to purchase Murray Goulburn, which produced Devondale, that ended up going ahead in $1.3 billion deal. Saputo then offered to divest the Koroit plant, which allayed the commission’s competition concerns.

Both Coles and Woolworths raised prices of its private label milk products last year to cover rising farmgate prices and mounting supply chain costs.

While food inflation rose by 9.2 per cent over 2022, dairy prices rose the most, exceeding 14 per cent.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Most Viewed in Business

From our partners

Source: Read Full Article