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.”