Australia’s competition watchdog, the Australian Competition and Consumer Commission (ACCC), has raised concerns about supermarket operator Coles’ plan to acquire two milk-processing plants from Saputo. The ACCC believes that this acquisition could have long-term negative consequences for dairy processors and farmers.
If the acquisition goes through, it would be a significant change for the dairy processing industry as it would be the first time a supermarket operator owns and operates its own milk-processing facilities. One of the ACCC’s main concerns is that Saputo, as a result of the divestment, may stop acquiring milk in New South Wales (NSW), leading to limited competition in the region. This, in turn, could result in lower prices for raw milk for farmers.
Industry participants are also worried about Coles consolidating its private-label milk production, which would give the supermarket operator increased bargaining power with processors and wholesalers. The ACCC warns that reduced competition at the wholesale level could have a detrimental impact on processors’ long-term viability, which would ultimately affect farmers.
Currently, Coles is already the largest customer for Saputo’s facilities in Laverton North and Erskine Park, supplying other milk products to retailers as well. However, Coles has assured that it will continue to provide processing services to Saputo even after the acquisition is complete.
According to Coles Chief Executive Leah Weckert, the supermarket operator does not see any lessening of competition in relevant markets. Nevertheless, the ACCC remains concerned about the potential effects of this acquisition on the dairy industry.