Coles recently commissioned Freshlogic to tell their side of the milk price wars in a effort to absolve themselves of any responsibility for the decimation of the NSW and QLD dairy industry and they got what they paid for – a report that uses out of date data to tell their side of the story
The latest data for the first half of 2012/13 show a very different picture Coles and the numbers show that milk production in Queensland and northern NSW has plummeted.
Independent analyst Jon Hauser of XCHEQUE has done the sums and analyses and blown the lid off Coles denial public relations spin and laid the blame firmly where it belongs at the feet of Coles,
Jon reports here that the cracks in the supermarket’s denial of a farmgate impact first started appearing in the second half of 2012. After lengthy, and no doubt heated negotiation, Lion and their milk supplier, Dairy Farmers Milk Cooperative, introduced a new milk pricing system that split the value between a relatively stable monthly milk quota (T1 milk), and the seasonal surplus (T2 milk). The average milk price paid to a large proportion of NSW and Queensland dairy farmers was decimated by this change.
We now have Australian milk production data through to December 2012 and the fallout from $1 milk is now very clear. The supermarket’s pricing strategy has squeezed the processors to near death and they have responded in the only way they can – attack their single largest cost of production – the milk price. In turn, the dairy farmers of northeast Australia have turned off the tap.
Supermarkets may say, as Lion once did, that there needs to be a ‘rationalisation’ of the industry. What they can no longer deny is that their competitive marketing tactics are are not having an effect on farmgate milk price and the subsequent farmer response.
What is even more disturbing is that some of the best and most progressive farmers have been forced out by the economic circumstance or lack of confidence. This type of market rationalisation is blunt economic and social instrument rather than a finely tuned economic equation.
$1 milk and the flow-on to the T2 milk price is a crude and disrespectful strategy for management of supply chain cost and market share in the Australian dairy industry. Farmers have worked too hard and long and invested too much money to be treated like this.
If supermarkets and processors are genuinely interested in developing “long term strategic partnerships” with the supply chain they should be prepared to make a real and significant contribution to the effort.
Jon sums up his report by saying
Stop and think what you are doing Colesworths. You have taken a very blunt axe to the Australian dairy supply chain. In our view you are definitely in denial if you think that you and your shareholders have no responsibility for the long term social health and economic wealth of Australian agriculture.
This cartoon also from the XCHEQUE team sums it all up
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There are no free lunches Australia somebody is paying for the milk discount. This is not about consumer need its about Coles’ greed.
Lets not forget Coles 2011-12 pre tax earnings of $1.356 billion delivered by hardworking Australians who sadly believe their PR spin. Shame on you Coles