Supermarket wars

Woolworths waiting for approval to cut out the dairy middle man

By RJ Whitehead

- Last updated on GMT

Related tags: Milk

Woolworths waiting for approval to cut out the dairy middle man
Should it be given the go-ahead, a new trial in New South Wales’ Manning Valley will see a supermarket dealing directly with dairy farmers for the first time ever in Australia.

Woolworths, which is leading the development, claims the move will give dairy farmers a better deal while keeping the price of milk products low. The deal hasn’t yet been struck but according to Woolworths and a farmers’ group in the valley, it is getting closer to completion.

Green light

The farmers recently lodged a collective bargaining notification with the Australian Competition and Consumer Commission (ACCC) to allow them to collectively bargain with Woolworths. An answer from the regulator is expected soon. 

Immunity for collective bargaining through the ACCC notification process is required before commercial negotiations with the Manning Valley farmers can commence. This will cover aspects of pricing, supply arrangements and contract periods and terms.

ACCC chairman Rod Sims supports the concept. "Generally, most collective bargaining applications get through because we think it's an effective way for people to work, so it's good if they can find another outlet​," he told reporters.

"If there's other avenues for farmers to sell their milk that can only be a good thing. The fact that Woolworths might be reacting to public opinion, I think that's what large companies do all the time. They need to be aware of their role in society and act accordingly​."

A successful notification would give the farmers immunity for collective bargaining to negotiate a landmark deal with Woolworths that will allow them to trial the supply of milk directly to the retailer in what will be an Australian supermarket first.

Farmers' Own

Woolworths wants to stock homogenised and unhomogenised milk sourced directly from the Manning Valley farmers in stores in New South Wales by the middle of the year. Under the trial, the milk will be marketed under a new brand—tipped to be called “Farmers’ Own​”—that will be jointly developed by the farmers and Woolworths. 

The supermarket has had direct relationships with meat and fresh produce farmers for more than 20 years, and most of these products are now sourced directly from the producer. However, this will be the first time an Australian retailer has contracted farmers directly for drinking milk.

Tim Bale, a Manning Valley dairy farmer, said: “We think this trial has the potential to provide a much better deal for farmers in the Manning Valley. Our aim is also to secure longer term contracts that will give us the confidence to invest in our businesses for a sustainable future​. 

There’s no doubt that consumers like A$1 milk, but we think they also recognise that farmers deserve a fair price for what we produce. It is to Woolworths’ credit that they have embraced this idea and are committed to making it work in partnership with dairy farmers in the Manning Valley​." 

Major issues

According to Woolworths general manager of fresh food, Pat McEntee: “There is no doubt there are a variety of significant issues affecting different parts of Australia’s dairy industry. No one factor—whether it be the impact of A$1 milk, or a tough export market exacerbated by a high Australian dollar—is solely responsible for state of the industry​.

This trial will not be the silver bullet to fix all the problems but we think it could herald a new way of delivering better returns to farmers and a more efficient supply chain. Over the last couple of years, our customers have expressed their concern about dairy farmers’ long term future in this country. We have also taken on board the industry’s concerns about the negativity that has been attached to their commodity and we have looked for opportunities to improve this​.”

Australia currently has one of the lowest levels of dairy consumption among the developed world, so it is only natural for farmers and processors to see opportunities to grow demand and promote innovation. 

Related topics: Business, Oceania, Dairy, Supply chain

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1 comment

woolworths are fooling themselves

Posted by Steven Horton,

WLW will have to hire the people that they are paying as middlemen to manage the the program. They are dreaming at the lower levels of management. The Directors of Woolworths should recall John Iliffe whose comment would have been "leave some room to choose your expertise - if you own it - you can become a sinking ship".

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