The announcement of a ten-year fresh milk supply agreement between Australian agricultural co-operative Murray Goulburn and Coles in April 2013 was a sizeable loss for Lion, Coles’ former supplier, and a clear win for Australia’s largest dairy co-operative.

 
The arrangement, set to commence in July 2014, covers the supply of Coles’ private label milk, as well as the relaunch of Murray Goulburn’s Devondale-brand milk and cheese.

The entry of a co-operative into the market has been hailed as a victory for both farmers and consumers, in that milk prices will remain at their current low levels but farmers will receive a larger share of the retail price. According to a Murray Goulburn media release, ‘[a]s a co-operative, Devondale will return 100% of the profits from this agreement to its farmer-shareholders through higher farm-gate returns.’

 
The stability offered by the arrangement has been tipped to facilitate greater investment in the dairy industry as a whole. Murray Goulburn Managing Director Gary Helou described the deal as delivering ‘the most significant investment in dairy processing in this country since deregulation’. The agreement has also been welcomed by lobby group Australian Dairy Farmers as a ‘positive sign of innovation and long term commitment’.

For further information, please contact:

James Robinson, Partner, Herbert Smith Freehills 
[email protected]

 
Graeme Preston, Partner, Herbert Smith Freehills 
[email protected]

 
Richard Loveridge, Partner, Herbert Smith Freehills 
[email protected]

Joseph Fisher, Herbert Smith Freehills
[email protected]
 

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