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Pollies blast $1/L milk

24 Jan, 2013 03:00 AM
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THE decision by Coles to continue selling $1 a litre home brand milk has been blasted by a raft of politicians, unconvinced by the supermarket giant’s reasons for the ongoing campaign.

Tasmanian Liberal Senator and Shadow Parliamentary Agriculture Secretary Richard Colbeck said the $1/litre price for home brand milk only devalued the product in the eye of consumers.

Senator Colbeck said Coles only used the cheap milk strategy as a marketing exercise “and nothing else”.

His view of the strategy’s industry impacts was well measured.

He said dairy farmers in non-exporting states would suffer, if the price remained at $1/L.

But in exporting states, the price is underpinned by international market conditions and the high Australian dollar has greater influence on business conditions in those regions.

“If milk is priced at $1/L it only devalues the product in the eye of consumers and that’s where dairy farmers should be legitimately concerned,” he said.

“I don’t think the supermarkets’ strategy makes sense for a whole series of reasons and it undermines their claims of support for the dairy industry.

“They are continuing to sell milk at $1/L because the issue keeps providing them with free media but it’s a marketing strategy and nothing else.

“We came to that conclusion very quickly during the Senate inquiry.

“In my view newspaper advertising departments should be going after their editorial departments for undermining advertising revenue.

“The continued news coverage is only giving free publicity to the Coles brand and it makes them look as though they’re cheap.

“But that’s coming at the expense of the community’s perceived value of the actual milk product.”

Senator Colbeck was also scathing of the corporate spin and communications employed by Coles throughout the debate.

“What’s really got up my nose is the way they created the impression this $1/L milk price was such a huge discount when in actual fact the two litre product only came down in price from $2.09 to $2 from the outset,” he said.

Senator Colbeck said dairy farmers also faced greater business pressures from additional red tape costs and other regulations imposed by the federal government, like the carbon tax.

NSW Nationals Senator John Williams said he also had major concerns about the ongoing impact on primary producers.

He said Woolworths warned the milk pricing strategy was unsustainable almost two years ago during the federal Senate inquiry, which he participated in.

Senator Williams said Coles had no other choice but to increase prices “immediately”.

He said a good start would be to increase home branded milk by 10 cents per litre, with 5 cents going to dairy farmers and 5 cents to milk processors.

“Coles said they’d wear the costs not the dairy farmer but they were wrong and our inquiry proves that,” Senator Williams said.

Senator Williams said milk processor Parmalat had a two-tier pricing system which meant when they sold branded milk to Coles, the dairy farmers received 58c/L, but its sales of home branded generic milk saw farmers receive only 42c/L.

“Because of the increasing sales of home brand, dairy farmers sold more milk at 42c/L than 58c/L,” he said.

“Woolworths said milk at $1/L is unsustainable and they were correct.

“We’ve got two dairy industries in Australia.

“One of them is in the south, in Tasmania, SA, Victoria and the southern borders of NSW, where the costs of production are lower.

“Those dairy farmers may survive because they can produce milk a lot cheaper.

“The other one is in the north, in WA, Queensland and northern NSW but those dairy farmers will do it a lot tougher because their production costs are much higher.”

He said he’d raise the issue with the ACCC at Senate estimates hearings in February, to see if Coles was selling milk below the cost of production.

Shadow Agriculture Minister John Cobb said the federal government had been complicit in the dairy industry’s demise.

He said while the $1/L campaign continued to drive more dairy farmers out of the industry, for the government it was “business as usual” as it ignored the industry and dismissed the unsustainable supermarket practices.

“From the start of the $1/L milk campaign Minister Ludwig and his predecessor came out in support of Coles claiming that it was ‘good news for milk drinkers’ before even speaking to the industry to understand the impacts,” Mr Cobb said.

Federal Agriculture Minister Joe Ludwig said he recognised the ongoing concern among dairy farmers about the pricing of milk in supermarkets.

He said the government supported both Senate committee inquiries into competition and pricing in the Australian dairy industry, and he would continue to meet with dairy industry representatives to discuss the issue.

“I understand there are broader concerns about supermarket power,” he said.

“As part of our work in developing our first ever National Food Plan, the government has been looking at this and how to improve food sector relationships.

“Industry representatives – including the National Farmers Federation and major supermarkets – are now working together to develop a framework for improving commercial relationships along the food supply chain.”

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Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
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READER COMMENTS

mbh
24/01/2013 8:04:30 AM

I don't agree necessarily with Senator Williams' assertion that Coles had no other choice but to increase prices “immediately”. That is a typical short-term knee-jerk reaction by a politician. Instead, why doesn't Parliament as a whole reform the Trade Practices Act and outlaw anti-competitive behaviour, setting limits on market share as they do in the United States and elsewhere. Overseas are amazed at how much market concentration and anti-competitive behaviour there is here in Australia. That would be a more thorough and effective outcome but I'm not holding my breath.
Denis
24/01/2013 8:27:13 AM

Thatnk you, thank you. This article has given me fantastic information, which is unusual. I occasionally buy Pauls milk. Now that I know it is Parmalat that is Coles supplier I won't be buying anything from Parmalat again! I also want to knwo who is the supplier of Woolworths home brand.
bg
24/01/2013 8:29:38 AM

Colbeck: Pot, kettle, both black. Pollies get cheap publicity by pretending they and only their side support the farmer against the duopoly. But where are the follow up actions? This will only be fixed if the laborals work together instead of each using it to shore up their voter base.
bill
24/01/2013 9:32:12 AM

thats nice. who deregulated the milk market and caused this outrage?? was it coles?? woolies??? farmers?? no, I seem to remember it was politicians. they are the problem. they make ridiculous laws with no idea or concern of the consequences, then pretend to whine about the problems. they alone have the power to fix it, so do so or shut up.
shaun
24/01/2013 3:32:51 PM

what a joke all this problem was caused by politicians it was called derregulation. then then pollies watch our producers go broke then the accc investigates supermarket dominance and suprise all is good for the supermarkets.polies the sort of people who beat you to a pulp with a stick and then care for you and tend to your wounds and tell you they are your best friend.
Supplyside
24/01/2013 8:28:54 PM

Strange how the representatives from the Liberal/nationals fail to understand the basics of trade, and supply and demand . It is meant to be their core philosophy. Far gate milk prices will rise when either demand expands and or supply diminishes . If the duopoly of retailers Coles woolworths, choose to minimise the retail margin with a one dollar milk price that's their prerogative, the lower price should increase demand. Surly a good thing! If the farm gate price is to low then the farmer must diversify into other typs of production or go out of busines and lower supply. Toughen up prince
Cattle Advocate
25/01/2013 7:36:03 AM

How does the 3 year $1/lt milk price war tie in with the WF sponsored ' Fresh Opportunities' report that wants to double WA cow numbers? With SM comments like, QLD Dairy Farmers should '' Get out and do something else.'' If milk was only produced in SE Aus where 1 efficient Vic dairy is looking at a -12c/lt return, Aus would loose 25pc of its milk and 60pc of its exports. QLD and NSW would need 100, 30,000lt truckloads daily just for packaged milk and another 600,000lts daily by 2020 from proccessors who were geared for export. WA would need another 80mlts pa on top of its current supply.
Cattle Advocate
25/01/2013 7:42:12 AM

SM tried the $1/lt stunt in NZ but Fontterra said if the much higher export price wasnt matched; thats where it would go, end of story.
CQ
25/01/2013 6:09:15 PM

If $1 milk was a loss leader strategby Coles, then I'd have no issue with it, as they would be recovering the loss on another product. What makes Coles conduct reprehensible is that they have used their bargain retail strategy as a way of procuring a lower buy price. The milk suppliers lowered the farm gate price, instead of getting a backbone & refusing to sell Coles milk at less than was sustainable for the farmer. That's where it went wrong for the farmer. The procesors sold them out instead of standing firm & saying no to Coles tactic.
Fabian
25/01/2013 10:11:09 PM

I'm a dairy farmer in WA and if we don't get the price rise that we need, we are not going to last much longer! FULL STOP! We cannot keep up with the ever increasing bills, the 16 hour days that my dad ( 63yrs ) and I have to do just keep us afloat. We can't afford to pay someone to even help us to have a day off! We can't afford to get out because who wants to buy a dairy farm to only go broke! I hope all you consumers out there like UHT milk because that's what your going to get to put on your kids cornflakes in the mornings, DIRECT FROM CHINA !!!!!
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Would ALC make the same decision if the market in question was the US or China?? I think not.
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"Change ahead! The faceless men of levies will be scrambling for their jobs." Spot on Geronimo
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Before the NFF think of 'how' they structure their model, they could think of 'why' we advocate.