Coles, an Australia-based super market giant, has entered into milk supply agreement with two farmer-owned Australian dairy co-operatives Devondale (Murray Goulburn Co-operative) and Norco.Devondale agreement is for ten years and the Norco agreement is for five years.
The move is expected to offer long term contract security and higher farm gate prices to thousands of east coast dairy farmers.
These new supply agreements will cover Coles Brand milk supply in New South Wales, south east Queensland and Victoria starting in mid-2014 after the contracts with existing dairy processors in these areas expire.
The retail chain plans to implement the same contract in Western Australia, South Australia, Tasmania and Far North Queensland.
Coles will pay Devondale and Norco a premium for their milk which will be passed back to the farmers.
Both co-operatives have over 2600 members and will look for additional milk supply, providing opportunities for more dairy farmers in all three states.
Coles merchandise director John Durkan said that these new agreements will enable the company to offer fresh to its customers at affordable prices.
"Our job is to provide a quality product at a competitive price and at the same time ensure that the dairy industry supplying Coles is strong, innovative and customer focused," Durkan added.
With these agreements, Devondale and Norco will invest in their existing and new processing facilities to create modern production plants.
Devondale managing director Gary Helou said: "We expect this agreement will lift prices at the farm-gate and our expansion will mean additional supply opportunities for members and farmers throughout Victoria and Central New South Wales."
Norco CEO Brett Kelly said: "This contract not only benefits our dairy farmers but also means consumers can now have greater confidence that there is a direct link from the farm to the supermarket shelf."
The agreement will also help Devondale to relaunch Devondale branded fresh milk adding it to other brands available at its stores.
