Fair go Woolworths I am shocked and disappointed

Can you believe Woolworths said its 2014 first half profit was up 14.5 per cent to $1.32 billion, or up 6 per cent ( Read more ) yet they expect vegetable growers to help fund their fee for engaging James Oliver

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Apparently Woolworths thinks everyone deserves a better deal  EXCEPT farmers

Goodness gracious me Woolworths this is disgraceful Veg growers slam Woolies’ Jamie Oliver fee and I am confident that Jamie Oliver will be just as mortified as me that this is happening.

Ausveg says growers have received requests from Woolworths to voluntarily pay a charge towards the costs of the new “Jamie’s Garden” promotion, equal to 40 cents a crate of produce sold to the supermarket.

While Woolworths says the request is voluntary, Ausveg national marketing manager Simon Coburn says growers are not in a position to say no.

“The growers feel like they are in a position that, if they were to say no, they are worried that their contracts would be reduced or terminated completely,” Mr Coburn said.

He said growers already paid a charge of 2.5 per cent to five per cent of their sales back to Woolworths to cover marketing costs, and the 40-cent charge was in addition to that.

The cost would range from a few thousand dollars to $250,000 for a grower, depending on the size of their contract, he said.

“Some are telling us they don’t have 40 cents left in their margins,” Mr Coburn said. Source AAP

Follow up media

Has Jamie Oliver been burnt by Woolworths media

http://www.brisbanetimes.com.au/queensland/blogs/the-hermit/jamie-oliver-burnt-by-woolworths-partnership-20140618-3aadz.html

http://www.smh.com.au/national/woolworths-recalls-jamie-oliver-toy-over-safety-fears-20140618-zsbdj.html

http://m.theaustralian.com.au/business/jamie-oliver-to-tackle-woolworths-over-vegie-levy/story-e6frg8zx-1226961808359?sv=e5efeb36f1aaf373557dd0b4427781f#mm-premium

and what is the ACCC doing about it. Quite a bit actually

http://www.theaustralian.com.au/news/features/are-supermarket-giants-simply-too-big/story-e6frg6z6-1226961691069#mm-premium

The world and your customers are watching Coles. Will you deliver?

I have sat in on many meetings since the Coles/ Murray Goulburn 10 year deal was announced and there are a lot of wise people in the dairy industry very concerned that Murray Goulburn has bitten of more than they chew by getting into bed with Coles. I hope they are wrong

Dairy Farmers Milk Supply Cooperative Chairman recently said in an open letter to farmer suppliers

The Coles media assault says that Coles want to look after Australian dairy farmers, that they want farmers to have security of tenure, that there will be an increase in milk prices and a premium over current regional milk pricing, and that they expect milk to be sourced locally for  MG contracts.

Macquarie Equity analysts inform that there has been a reduction in wholesale price into Coles so there are real questions as to the transparency of it all; what will be the price set and the price premium. It is a question of what is the money and where will it come from. Let us not forget that Coles also said that $1 milk would not hurt farmers. Coles has the media story, will their new partners deliver? In truth it is a test for Coles to deliver.

Many are saying that the Australian dairy industry is entering the perfect storm. Milk’s heartland Victoria is under extreme pressure from dry conditions, and no real break in the weather is predicted before mid-June and the weather is turning cold, a dire combination that means there will be a shortage of grass to feed cows. On top of this 4% of Australia’s milk supply has rumoured to have gone into receivership

Milk supply in NSW is predicted to drop below 1 billion litres for the first time ever

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Source Dairy Australia

Large processors supplying the domestic market are hurting

It is in this market that Lion has no return on capital in the milk division, low EBIT margins and has written off approximately two billion dollars.

Fonterra is realigning their Australian business, changing its consumer brands as the retail price war in milk begins to bite into its profits. EBIT from its Australian consumer brands fell 31 per cent.

Fonterra Chief Executive Theo Spierings said that “there’s a new reality in Australia,” and that Fonterra is facing “aggressive competition” in milk supply and, with a retail price war in Australia; it has to ensure its supply chain is cost-effective.

Fonterra currently has 21 brands in Australia, which has room for a maximum four or five, he said. It was too soon to say what plants or jobs losses may result, though Mr Spierings noted the company has a wide variety of yoghurt brands and also faces pressure in the milk market.

On a positive note the Global Trade Weighted Index for all dairy all around the world has gone sharply upward.

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This is likely to mean that the tanker after tanker load of milk that is currently coming up from Victoria to fill the milk shortfall in NSW and Queensland will stay in Victoria for export

Seasonal conditions have been part of the perennial challenge and there is no doubt adverse climatic conditions are harder to handle in our dairy businesses that ever before. This goes for all of agriculture, there is simply less room for failure.

The fact that dairy is tougher than ever is evidenced by the tough climatic events causing farmers to exit the industry. We are running out of reserve, both in terms of cash but also equity, and the ability (and incentive) to borrow.

The national industry is not growing; the pincer of cost and revenue is tightening. When tough times such as floods and dry spells occur, low levels of farmer confidence result in some questioning why they would battle on again for this uncertain future. For this reason among others, the assurance of better terms for longer term is an imperative for farmer confidence and viability. said the DFMC Chairman

Tomorrow I am attending yet another review with a very large regional business that relies on our region prospering. What heartens me is there are many people big and small out there who care about our farmers and they are working side by side with us on the solutions

Yes indeed Coles you do appear to have trumped Woolworths with your latest media story, but no-one is forgetting you lied when you said that $1 milk would not hurt farmers. In fact its got to the point where it is hurting consumers and the country as a whole

The world and your customers are watching Coles.  Will you deliver?

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

AYOF  (7)

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