Watchdog will ‘regret’ letting Coles buy milk processing plants

The ACCC approved the supermarket’s takeover of Saputo’s two dairy processing facilities after a ‘detailed review’ but farmers fear the move will reduce competition in the market

Dairy industry representatives have said the Australian consumer watchdog will regret its decision to allow Coles to purchase two fresh milk processing facilities, making it the only supermarket in Australia to own and operate a milk processor.

The Australian Competition and Consumer Commission said it approved the takeover by Coles after months of “careful consideration” and “discussions” with farmers and industry bodies, and a “detailed review” of Saputo and Coles’ internal documents.

In April, Coles announced it had bought the Erskine Park factory in New South Wales and the Laverton plant in Victoria from dairy processor Saputo for $105m, subject to regulatory approval from the ACCC.

The president of advocacy body Australian Dairy Farmers (ADF), Rick Gladigau, said he opposed the decision.

“We hope that in 10 years’ time we are not saying ‘we told you so’, like we have said about the impact of $1 litre milk that Coles started in 2011,” Gladigau said.

“We cannot see how this deal will result in anything but increasing Coles’ already substantial market power, reducing market competition and market transparency, and increasing risk to farmers.

“[It] will be a key turning point that the industry and ACCC will look back upon and regret.”

Before the takeover, Coles already acquired about 80% of milk processed at the facilities, buying raw milk from producers and processing it at the plants under an agreement with Saputo.

Farmers raised concerns that the acquisition would result in Saputo leaving the NSW fresh milk market entirely, reducing competition of raw milk buyers.

But the ACCC deputy chair, Mick Keogh, said Saputo’s financial records suggest the company has the “commercial incentive” to continue operations in NSW, and therefore takeover is “unlikely” to significantly lessen competition in the market.

“We considered that the proposed acquisition would be unlikely to change Saputo’s incentives to continue acquiring raw milk from farmers in NSW for at least the next five years,” Keogh said.

Other dairy companies, including Lactalis and Bega, would also continue to provide competition in central NSW, Keogh said.

The chief executive of the Business Council of Co-operatives and Mutuals, Melina Morrison, said the organisation remains “concerned” about approval of the purchase.

“As processing facilities are further concentrated in the hands of a few investor-owned dairy processors and retailers, there is less and less pressure on these businesses to share profits with farmers,” Morrison said.

Source : The Guardian Dec 4th 2023