Milk price wars – Clover Hill Diaries – Join Me and Be the Change

Coles Milking the Cash Cow Dry

For those of you who read this excellent blog from Milk Maid Marian will know she has quite a way with words so when I was sent this classic ‘Explaining Ideology With Moo Cows!’ that does the rounds from time with updates on what is topical at the time I knew Marian was just the person to give it an Australian dairy milk prices wars theme.

What a clever little vegemite she is. Less than a minute it took her to put together the Coles Corporation ditty ( see bottom of post )

Subject: The world economy

SOCIALISM

You have 2 cows.
You give one to your neighbour.

COMMUNISM

You have 2 cows
The State takes both and gives you some milk.

FASCISM

You have 2 cows.
The State takes both and sells you some milk.

BUREAUCRATISM

You have 2 cows.
The State takes both, shoots one, milks the other and then throws the milk away.

TRADITIONAL CAPITALISM

You have two cows.
You sell one and buy a bull.
Your herd multiplies, and the economy grows.
You sell them and retire on the income.

VENTURE CAPITALISM

You have two cows.
You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows.
The milk rights of the six cows are transferred via an intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company.
The annual report says the company owns eight cows, with an option on one more.

A FRENCH CORPORATION

You have two cows.
You go on strike, organize a riot, and block the roads, because you want three cows.

AN ITALIAN CORPORATION

You have two cows, but you don’t know where they are.
You decide to have lunch.

A SWISS CORPORATION

You have 5,000 cows. None of them belong to you.
You charge the owners for storing them.

A CHINESE CORPORATION

You have two cows.
You have 300 people milking them.
You claim that you have full employment and high bovine productivity.
You arrest the newsman who reported the real situation.

AN INDIAN CORPORATION

You have two cows.
You worship them.

A BRITISH CORPORATION

You have two cows.
Both are mad.

AN IRAQI CORPORATION

Everyone thinks you have lots of cows.
You tell them that you have none.
Nobody believes you, so they bomb the crap out of you and invade your country.
You still have no cows but at least you are now a Democracy.

AN AUSTRALIAN CORPORATION

You have two cows.
Business seems pretty good.
You close the office and go for a few beers to celebrate.

A NEW ZEALAND CORPORATION

You have two cows.
The one on the left looks very attractive.

A GREEK CORPORATION

You have two cows borrowed from French and German banks.
You eat both of them.
The banks call to collect their milk, but you cannot deliver so you call the IMF.
The IMF loans you two cows.
You eat both of them.
The banks and the IMF call to collect their cows/milk.
You are out getting a haircut.

A COLES CORPORATION

You have two cows

You refuse to feed them and complain they make too much noise

You give away their milk while picking the pockets of everyone who passes buy

Eventually, the cows die of starvation, so you get everyone drinking UHT instead

Special Thanks to XQHEQUE for this very accurate cartoon comment

Farm to glass the farmers side of the milk price war story for Coles

Coles is obviously very concerned about negative publicity they are receiving over their part in the current dairy industry crisis and are spending mega dollars on PR spin. This week Coles launched themselves back into the world of social media after many previous disasters with an animation full of half truths

In regards to my efforts to counter the half truths I don’t make billion dollars profits nor am I on million dollar bonuses so I cant afford to engage consultancies like Coles. So in this post I relying on various types of industry intel and my knowledge of the behind the farm to glass scene so I am happy to stand corrected Coles. The last thing I want to do is perpetuate half truths

I also cant afford to engage graphic artists to create expensive animations for me so I will have to work with what is out there and this nice little picture above that Dairy Australia has created to tell the farm to glass story is pretty impressive. So lets start with that

Fact– As as you can see there is quite a process involved to get the milk from the farm to your glass. Did you know along the way the industry directly provides more than 40,000 jobs.

Nobody (not even Coles) is going to deny the dairy industry is in crisis for all sorts of complex reasons. However admit it or not Coles is part of the problem and to date they are refusing to be part of the solution. So I think its fair to say that’s 40,000 jobs Coles is helping to put in jeopardy

Below are few more bits and pieces I have collated by chatting to people along the supply chain including a few Coles employees.

Lets start with those consumer complaints that when they walk into Coles the shelves that stock the Dairy Farmers brands are almost always empty.

Fact- This is because Coles staff are directed to refill the home brand shelves 3 to 1. So for example in one 12 hour period they will restock the Coles brand milk 9 times compared to the say the Dairy Farmers brand three times.

There is no mention in the Coles animation of their new direction in the milk prices wars of “offering $1 per litre milk through more than 600 Coles Express outlets Australia-wide in what is seen as a direct attack on the traditional corner shop – a sector which is already suffering in the cross fire supermarket giants’ food price war”.

Now as I mentioned in a previous post convenience stores are part of what is known as the route trade. This graphic below shows the route trade. How many people have family members who work in the route trade?

Fact- Coles are up 6 points and route is down 8 points in the last year.?

How safe are those jobs now that Coles is gobbling up the route trade business?

Lets get back to the dairy farmers and Coles apparent benevolence towards them .

This picture above is part of the animation Coles claim dairy farmers were getting 86c/litre before the milk price war and now their getting 90c/litre. As Angus White quite correctly reminds Coles in this comment on their YouTube page

Not only are they claiming dairy farmers get more that two to three times what they do they are actually claiming they are getting more now then what they did 2 years ago when the milk price wars started. If that’s what your consultant told you Coles I’d be asking for a refund

Coles is also spruiking “To further protect farmers, our milk contracts with processors all contain a “rise and fall clause” so if they increase their farm gate prices for farmers, the price we pay will rise.” This begs the question why haven’t the processors taken up the the “rise and fall clause” . Me thinks it might be fear what do you think?

I could go on and on like the Coles animation but we all know Coles is growing the size of their bank account not Australia.

As Halter so correctly points out here

We forget, there are no free ‘lunches’ as they say – every action has a reaction – somebody pay’s for the ‘discount’ and ultimately it’s all of us. How often did you hear this behaviour rationalized as ‘the need to take the opportunity to save on groceries’.

Fact – Coles recorded a 16.3 per cent increase in 2011-12 pre-tax earnings to $1.356 billion.

I think that fact alone says it all – strange its not in the animation!!!!

Farmers and the Community maintaining the rage in the Milk Price Wars

The Farmer’s Angel Alison Fairleigh has gone into to bat for Australian dairy farmers. You can read the full version (snapshot below) of her fabulous blog post here

Someone described consumers to me the other day as “notoriously dense”. Just like sheep, we have a herding mentality and the large supermarkets (Coles & Woolworths), with their multi-million dollar marketing budgets, play on this mentality perfectly for guaranteed market share, mega profits and shareholder satisfaction.

Let’s take a look at $1 per litre milk as an example of how well the duopoly pull the wool over consumer eyes. People purchase the so-called “discounted” milk because it’s cheap, because food budgets are tight and because they feel they are making a small saving on an item that is a staple for most families. But are they really saving? As this infographic from Dairy Defenders portrays, they are paying for it on other items.

Our dairy farmers are continuing to maintain the rage too with Milk Marian Marian appealing to Curtis Stone’s sense of community in this thought provoking blog. Marian is appealing to Australians to email Curtis as she thinks he maybe he’s” blissfully unaware of the damage” to Australian farmers and the threat to Australian food caused by his highly successful marketing campaigns on behalf of Coles. Marian says “I intend to appeal for help by emailing him at contact@curtisstone.com and am sure he’d love to hear from you, too”

I will be emailing Curtis too and inviting him to visit Paradise.

Perhaps he might even like to stay the night so he can get up and help milk the cows and meet all our wonderful young staff whose jobs and futures are under threat by the fallout from the supermarket milk price wars.

He can meet some of our cows that we have nurtured from their first breath.

He can meet Peena the lamb. I am sure he will find her just as fascinating as the cows do

He can meet Nick and Emma who are looking forward to bringing up the 8th generation of dairy farmers at Clover Hill

It will be interesting to see the response to my invitation. I am confident Curtis would love to come but will Coles let him?. My impression is they are just not interested in seeing the real story. I have probably got more chance of getting Bill Gates to visit my farm than Coles allowing Curtis Stone to come.Coles management just don’t get it and sadly I don’t think they want to get it. Management have short term targets and short term vision and all they care about is getting their bonuses and appeasing shareholders.

As farmers we get up every day to do our very best to live up to the promise of best outcomes for people. animals and the planet. As a result of the milk price wars there are now hundreds of farmers receiving prices like 12c/litre for their milk. It is ridiculous that Coles just don’t understand this is not enough money to fed cows, feed your family, reduce your footprint and deliver best environmental outcomes and spend money in your community or employ people, let alone all the other things on farmer wish lists. Something has to give and just how do you chose and live with the decisions you make.

Maybe the only answer is to become as detached from reality as Coles appears to be and if that is the only option one thing I know at Clover Hill we wont choose to ever stoop that low

Come and visit paradise Curtis and see for yourself. We will show you our best country hospitality as we are very #proud2dairy

Who really benefits from the milk prices wars

I think the statistics tell the real story

Coles tell us its “Down Down Down campaign” saves its shoppers $450 per year.

Coles on the other hand recorded a 16.3 per cent increase in 2011-12 pre-tax earnings to $1.356 billion.

Coles CEO Ian McLeod earns $15.63 million in salary alone. Cant even imagine what his bonuses are

McLeod’s spectacular earnings are more than double that of his boss, Wesfarmers CEO Richard Goyder, who made $6.9 million last year.

Coles home label brands now account for around 51% of Coles milk volumes, up from around 25% in 1999/2000. This result has been rapidly assisted by the current $1/litre milk discounting marketing strategy

I don’t know whether to laugh or cry when they spruik the milk price wars are solely to help Australian families.

Australian dairy farming families are in Crisis

I don’t know about you but to me no-one tells a story from the heart more powerfully than Marian MacDonald. See Sad Discovery that is Good for My Green Farm Girl

My story today comes from my heart to yours. The Australian dairy industry in crisis. It is not just the domestic milk supplying states of QLD, NSW and SA that are affected. The milk processing company Lion will endeavour to offload the 15c/litre* (see footnote) T2 milk it is paying its farmers into milk processing plants in Victoria and this will put severe downward pressure on farm gate milk prices in this state as well.

Victoria is known as the dairy state and currently 70% of milk production comes from south of the border. The current farm gate milk price in Victoria is already impacting on farm and this new pricing structure for Lion suppliers I can assure you will have serious ramifications right across Australia.

How did we get in this sorry mess you ask? Let me share what Dairy Australia has said in its In Focus publication.

“The two issues putting downward pressure on prices at present are – oversupply of milk in the Eastern states and the supermarket discounting of milk“

Now it should be as clear as the nose on your face that a milk processor like Lion could get smart and correct the oversupply issue by investing in a dryer for skim milk powder production for example which would allow it to take up the excess milk for export purposes.

On the other hand we could have another ten year drought. Don’t think anyone will be suggesting the latter option.

Just so you understand why we have an oversupply of milk in NSW, SA and QLD. Dairy farmers were given clear market signals through large incentives paid by Lion to grow their milk supply businesses. Sadly Lion’s milk sales business did not have the same growth spurt

Now to the supermarket price wars. The supermarket discounting will end when they have achieved their objective of growing the home brand share of the milk market to their targets and ultimately the target is to have only home brand milk on the shelf and the strategy is working.

Supermarket’s share of Australian drinking milk sales is now around 53% and growing. Home label brands now account for around 51% of total supermarket milk volumes, up from around 25% in 1999/2000. This result has been rapidly assisted by the current $1/litre milk discounting marketing strategy

And as you can clearly see using milk as a loss leader is making them buckets of money. See “Another strong earning performance from Coles supermarket division “

How can you help?

To assist dairy farmers you can choose to purchase branded milk products not house brands. It doesn’t matter what brand as long as it is not Woolworths label or Coles label. This will support the margins of the processors and this offers the best opportunity for farmer margins.

You can also choose to purchase milk from venues other than Coles and Woolworths.

What can Coles Do?

It is absolutely critical that they stop using milk as a loss leader

So what solution will we chose?

What are we going to do Australia? Do we change our buying habits or do we lobby Coles?

I say let’s go both barrels. Love to hear what you think

Look at these beautiful creatures Surely their milk is worth more than 16c/litre

Footnote I am yet to find a farmer who has received the mooted 15c/litre most people are getting between 11 and 13c/litre. The variation is caused by the different milk fat and protein percentages on farms

Wake up Coles please dont put your profits before Australian farming families

Coles profits are riding on the back of their Down Down Down campaign. As reported in the Sydney Morning Herald today “Wesfarmers said full-year net profit rose 11 per cent to $2.126 billion. Its Coles unit capped a third year of market-beating performances as it stepped up its price war with bigger rival Woolworths.” But this comes at a cost, a huge cost and there is no denying dairy farmers are the current collateral damage in this drive for billion dollar profits”

My blog post yesterday Coles is Making my Blood Boil saw an outpouring of united support for dairy farmers from both the community and our fellow farmers.

Now that the community is aware that Coles is suggesting their customers support their Down Down Campaign that is having such a devastating effect on Australian dairy farmers to put an extra $1.23 per day in their pockets they are mortified. Appalled that Coles is effectively asking them to be complicit in the downfall of Australian farming families.

How do we right this terrible wrong. People Power that’s how. No matter how much the government would like to help their hands are tied. However every single Australian can stand up and have a voice and say Coles we wont support you if it means Australian farming families and the jobs they support in the broader community are threatened

What can you do”. You can vote with your wallet and/or your feet Australian families.

You can do this in two ways

Option 1. Is to buy branded milk rather than supermarket equivalents. This would support the margins of the milk processors and the real opportunity for this to flow back to farmers.

Option 2 You can seek out your independent Australian owned supermarkets and grocers and support them instead of Coles.

The government needs your help too. Their National Food Plan aims to provide all Australians with affordable, nutritious LOCALLY produced food that is good for people, animals and the planet. Lets help them do it. Support Aussie Farmers and say no to Coles Down Down Down campaign and the massive profits it is putting in their pockets

Our future is in your hands Australia. We can win this one together

Till death us do part

The trials and tribulations of the last 18 months have left us questioning our resolve to get up every day to help feed the world. See previous post

2011 started with a supermarket price war instigated by Coles that used “free” milk as a customer traffic driver with a laughable promise by Coles that this would not affect farmers

In March we had the 1 in 50 year flood and the heartbreak that brings including being utterly powerless to save one of our most adorable cows when she was swept into the floodwaters and found herself stuck in a drain with no chance of survival.

Simola (pictured with Emma) lost her life in the March 2011 flood

Then all the Dairy Farmers (who supply National Foods) suppliers in our region felt the impact of the milk price wars with a 30% drop in their allocated quotas as well as a drop in farm gate milk price

Always looking for the opportunity we rose to the challenge and managed after much haggling to convince Dairy Farmers to allow us to bring both our Dairy Farmers contracts to the Clover Hill farm. In the first instance this required a $170,000 investment in a new milk vat. We were then able to grow our business, keep the staff we had and employ one more by supplying Parmalat from our Lemon Grove Farm.

This also required the purchase of 100 more cows and the need to grow enough pasture to graze 6 cows to the hectare which is almost three times the industry average. This is very doable in paradise but along came the 1 in 25 year flood with us now finding ourselves 4 weeks behind with pasture sowing and feeding our cows twice a day on bought in feed with the help of the mixer wagon which adds two hours to Michael’s day .

Michael uses the mixer wagon to supplement the milking cows feed when pasture levels are low

We have pushed the boundaries in the last twelve months at all levels and it isn’t just the landscape feeling the pressure. Every night Michael comes in and spends two hours with his knees elevated wrapped in ice doing his best to give everyone who walks in the door that big smile he is so famous for and it breaks my heart to see him in so much pain from the rigors of his job

On Friday some-one on twitter shared this article with me and this breakout piece so resonated with me.

Why don’t farmers retire?

“Agriculture is notorious for having a skewed age structure,” says Dr Matt Lobley, of the Centre for Rural Policy Research, University of Exeter.

“Unlike any other profession, there is not much separation between what somebody does for a living and their whole personality.

“They can literally go outside and walk around the farm and see the products of their labours written into the landscape – in the shape of the walls, the hedges and in the fields.

“It can be very difficult to face up to that time when they have to let go either partially, or fully.

“These farmers are also socially embedded into their communities, and they have an intimate knowledge of the land.

“They understand micro-climates of individual fields – which are the last to warm up, where you get frost pockets or flooding. That knowledge is often under-estimated, even by the farmers themselves.”

My family is proud to farm. We are committed to supplying affordable, nutritious, ethically produced milk to over 50,000 Australian everyday but we cant do it for free

In the words of Louise Fresco “Food is as important as energy, as security, as the environment. Everything is linked together.”

All Australians must value food at its true value and be prepared to pay for it. Yet we continue to ignore this at our peril and we are denying these young people a future as part of the noblest profession and this wont happen either Julia if we don’t have the farmers to fuel the agribusiness sector.

Stand up Australia and be counted. May I suggest we all start with a signature on this petition to send to the Victorian Government to try & stop the National Centre for Farmer Health from closing. http://www.change.org/petitions/state-government-of-victoria-stop-the-national-centre-for-farmer-health-from-closing