Woolies to combine with region's farmers

Retail giant Woolworths is considering negotiating directly with South West dairy producers in a bid to create a premium milk brand.

The Woolworths-South West milk brand will have the supermarket chain deal directly with farmers – a move which had WA dairy giant Brownes Dairy in crisis meetings with its suppliers this week.

Woolworths have a similar product in New South Wales, Farmers Own, which puts out three varieties of milk that is bought directly from farmers and processed by an independent contractor.

Seven and a half years are left on a supply contract between Brownes and Woolworths, with the WA dairy company aware of the possible independent brand before signing its latest deal.

It is estimated the deal between Brownes and Woolworths is worth about $20 million a year for 25 million litres of milk.

A spokesman for Woolworths said the company would look at creating the new WA brand because of its success in the eastern States.

“This would be, if we chose to do it, an additional product where we would sign up a group of farmers to supply a particular milk product in WA, ” he said.

“In NSW we saw milk consumption increase, it wasn’t just stealing milk from other sources.

“It is a premium product in NSW and is not pitched at that dollar milk range, it is more pitched against the national brands range.”

Woolworths would outsource the processing as production output would be too small for its own processing facility.

WA Farmers Dairy Section president Phil Depiazzi said if Woolworths went direct it would have a limited benefit for farmers.

“It would only be a small group of farmers benefiting, it would be limited volumes which they need, ” he said.

“Because it will only be a small market and involve a handful of farmers, it won’t put pressure on price. The current scenario of milk supply being tight will have a larger bearing on milk prices.”

Mr Depiazzi said a sustainable milk price was required to ensure investment for long-term growth.

There has been a fall in milk production in WA by 33 million litres over the past 24 months.

Brownes Dairy declined to comment when contacted by the South Western Times.