Retailer's proposed acquisition of Saputo milk plants raises competition concerns

Coles' plans to acquire two processing plants owned by dairy processor Saputo Dairy Australia Pty Ltd is has prompted the Australian Competition and Consumer Commission (ACCC) to consider if the deal would limit competition in regions of New South Wales and disadvantage the local farming community.

If the transaction goes ahead, the move would make Coles the first retailer to own and operate its own milk processing facilities. There are also fears that Saputo could exit New South Wales once the acquisition is complete, leaving local farmers at risk of receiving lower price for their produce.

The facilities, located in Laverton North, Victoria, and Erskine Park in New South Wales, are currently being used to process fresh milk for Saputo’s Devondale brand and for own-brand products by other parties, including Coles. But while Coles is the largest customer, the plants also supply a range of other milk products to retailers. The ACCC is said to be ‘carefully considering’ if the dairy processor’s exit from the state would be ‘likely’ once the deal is struck, and if Coles’ would have sufficient bargaining power to influence the market.

ACCC deputy chair Mick Keogh commented: “We have heard strong concerns across the industry about how the acquisition will strengthen Coles’ position in the dairy supply chain. Many industry participants have expressed concerns that the acquisition will result in Coles consolidating its private label milk production, which would increase its bargaining power in negotiations with dairy processors and dairy wholesalers.

“For NSW dairy farmers, concerns have been raised that this acquisition may change Saputo’s incentives to continue acquiring raw milk in NSW. If Saputo does exit NSW as a result of the acquisition, this would leave limited competition in regions of NSW, which could result in farmers receiving lower prices for their raw milk”.

The ACCC is inviting submissions from interested parties until August 3, 2023. In particular, the Commission is seeking views on the impact on prices or terms of supply farmers receive for their raw milk in New South Wales and Victoria; the impact on prices for fresh milk processing services in the two states, and on the possibility that the transaction could give Coles the ability and/or incentive to foreclose other dairy processors, wholesalers or retailers.

Submissions should be forwarded to mergers@accc.gov.au with the title ‘Submission re: Coles/Saputo processing facilities - attention Nicholas Wellfare’.