Federal Agriculture Minister David Littleproud has called on shoppers to boycott Coles after the supermarket giant broke away from Woolworths to say they would continue to sell $1-a-litre milk.
Aldi was also in Mr Littleproud’s firing line following its refusal to hike milk prices as pressure grows for the major supermarkets to end the price war and support the beleaguered dairy industry.
On Monday, Woolworths said it would add an extra 10 cents per litre to benefit struggling farmers who would receive “every cent” of the price increase.
Coles’ chief executive Steven Cain cited cost of living pressures on customers when defending the company’s decision to leave milk at $1-a-litre.
“One thing I can’t do as CEO of Coles is disadvantage our customers at a time when clearly they’re under household budget strain,” he said after handing down Coles’ first half-year results today.
“We’ve been one of the main supporters of farmers, we’ve distributed nearly $16 million so far, but it’s important that we don’t disadvantage Coles customers.”
But Mr Littleproud accused the supermarket chain of “pretending” to be a decent corporate citizen and Aldi of “hiding under the stairs”.
Woolworths is getting rid of $1 milk. It’s time Coles and Aldi got behind dairy farmers and did the same. pic.twitter.com/EuEzncCDK4— David Littleproud (@D_LittleproudMP)
Dairy farmers struggling with drought needed an end to Australia’s “$1 milk disaster”, he said, a price war that began eight years ago and has been blamed for sending some farmers to the wall.
“Publicity stunts like (Coles) asking shoppers to donate at the counter to help struggling farmers are just a smoke screen to hide the fact they pay bugger-all for milk,” Mr Littleproud said.
“The farmers wouldn’t need donations from the public if Coles and Aldi paid fair prices.”
Coles, Aldi and Woolworths have been under increasing pressure to raise the cost of fresh milk by the dairy industry, which has long said $1 a litre is unsustainable and was sending farmers broke.
However, in a long statement released today, Aldi’s head of buying, Oliver Bongardt, said the German supermarket would keep prices where they were.
In fact, he criticised Woolworths for going around the major milk processors to deal directly with dairy farmers.
“Aldi is not supportive of retailer-led initiatives that seek to bypass the normal supply chain and channel money directly from retailers to primary producers, whether for the dairy industry or any other of the many agricultural sectors currently impacted by difficult conditions,” Mr Bongardt said.
“The most meaningful and effective action Aldi can take in response to the difficult conditions that face many primary producers is to work with the suppliers with whom we have direct relationships. In the case of milk, our suppliers are the major milk processors.
“To this end, Aldi has accepted significant cost price increases in recent times from our milk processors to properly reflect market conditions. We in turn expect all our suppliers, including milk processors, to deal fairly with primary producers by paying sustainable prices.”
Mr Bongardt said “ensuring that we provide the lowest everyday prices to the Australian community is integral to our customer promise”.
COLES SAYS NO
In a statement released late yesterday, Coles said it would not be upping milk prices and would instead explore “additional options … to best support Australia’s hardworking farmers”.
Coles also encouraged customers to support Aussie farmers by putting money in the donation tins sitting at each supermarket aisle from February 25.
The supermarket giant would then match donations dollar for dollar.
“Coles is passionate about supporting our farmers and producers and in the past six months has committed $16 million to support this important industry,” Coles said.
“This includes contributing around $4 million to almost 640 dairy farmers through the Coles Dairy Drought Relief Fund and more than $7 million in partnership with the Country Women’s Association, resulting in over 2,300 additional grants for drought-affected farmers.”
Coles said it was seeking a “long-term solution that does not disadvantage customers and supports our dairy farmers”.
Yesterday, Woolworths Group CEO Brad Banducci said times remained tough for farmers: “This is affecting milk production and farm viability, which is devastating for farmers and the regional communities in which they live. It’s clear something needs to change and we want to play a constructive role in making this happen.
“We believe the long term sustainability of our dairy industry — and the regional communities they help support — is incredibly important for Australia.”
Mr Banducci said the price hike would deliver higher milk prices to more than 450 Australian dairy farmers supplying Woolworths branded fresh milk.
“While we’re realistic this won’t solve broader structural issues, we hope it will help inject much needed confidence into the sector and the regional communities dairy farmers do so much to support,” he said.
Coles was the first supermarket to cut milk to $1 a litre. The move in January 2011 caused waves throughout the dairy industry and led rivals to similarly drop their milk prices.
At a senate inquiry into the dairy industry later that year, Coles’ then boss Ian McLeod said the firm was not “out to damage” farmers but the decision had been made to assist with the “hardship facing many Australian families”.
In 2013, Woolworths launched its “Farmers Own” brand. This was an alternative to the standard home-brand variety which saw Woolies dealing directly with dairy farmers rather than going through a processor that creamed off its own profits.
Since September, Woolworths has also sold a special “drought relief milk”, the price of which is now identical to the new price of the store’s standard milk, which it says has delivered $5.8 million to 285 dairy farmers. Woolies will now withdraw the drought relief milk given its private label milk will return the same amount to farmers.
Coles added a 10c levy to benefit dairy farmers at the same time but only to its 3L bottles. The levy ended last year.
Australian Dairy Farmers CEO David Inall has backed Woolies’ move: “There is no doubt that this is a game changer in the fight against discount dairy that has long frustrated the industry.
“It is reassuring that Woolworths has committed to deliver the full 10 cent increase back to those farmers who supplied the milk into that product category.”
Federal Agriculture Minister David Littleproud said he hoped the decision was the beginning of the end for Australia’s “$1 milk disaster”.
“Supermarkets can’t pretend selling milk cheap doesn’t hurt farmers and they’ve got to be called out on this rubbish,” he said.
The minister said Australia’s competition watchdog had found supermarkets used their market power to drive down what they paid processors, and processors used their bargaining power to drive down what they paid to farmers. “There were around 7500 dairy farmers in 2010 and now there are just under 6000 as the industry has consolidated. There’s no point having cheap milk for consumers today if it sends farmers broke.”
In NSW alone, milk production has fallen by 11 per cent over the past year and the NSW Farmers’ Association says Coles and Aldi must also act if they want a sustainable diary industry.
Woolworths acknowledged some customers would be dismayed by the price change.
“We’re acutely aware of the budgetary pressures facing many of our customers and have not taken this decision lightly,” Mr Banducci said.
“We believe it’s the right thing to do and a key step in shoring up fresh milk production in Australia. We’ll continue to work very hard to offer great value to our customers across their total shop.”