Saputo has announced it plans to sell two of its fresh milk processing facilities in Laverton North, Victoria, and Erskine Park, NSW, to supermarket Coles, a situation the dairy industry says needs to be watched closely.
The transaction is valued about $105 million and is subject to clearance from the Australian Competition and Consumer Commission and other customary closing conditions.
The deal is expected to be completed in the first half of 2024.
Saputo chair and chief executive officer Lino Saputo said the intended divestiture would help the processor streamline its operating model, strengthen market competitiveness, and allow it to reinvest in areas of the business that provided better value.
“We’re continually working to ensure we have the right manufacturing footprint and product offering to enhance our position as a high-quality, low-cost processor,” Mr Saputo said.
“This marks an important step in executing our long-term vision for success in Australia as we maintain a sharp focus on efficiency to ensure we maximise the return on every litre of milk.”
Each facility has the capacity to process around 225 million litres a year and they are currently mainly used to process Coles Own Brand two-litre and three-litre milk.
Coles chief executive officer Steven Cain said as well as improving security of its milk supply, the facilities had capacity for further growth opportunities through new product innovation.
“The acquisition will build on the strong relationships we have developed with our dairy farmers since launching our direct sourcing model in 2019,” Mr Cain said.
“Around 90 dairy farmers supply milk direct to Coles, allowing these farmers to invest for the future and ensuring the long-term sustainability of their farms.”
Saputo employees at both facilities will be offered employment contracts with Coles.
Coles said it would continue its direct sourcing model and relationships with existing dairy farmers, with no expected impact on current arrangements.
Dairy advocacy group eastAUSmilk said the farm gate price paid to dairy farmers must remain fair and transparent, with Coles now owning the equivalent of the dairy “paddock to plate“.
eastAUSmilk co-chief executive officer Shaughn Morgan said the ACCC must ensure there were no negative impacts upon the Australian dairy industry, especially given the declining milk production and farmers exiting the industry over the past years.
"We will closely monitor the ACCC review and the impact that the Coles purchase may have on the dairy industry," he said.
The sale follows Saputo’s announcement late last year that it was selling its Maffra plant.
At the time, the company also announced it was investing $20 million to expand its Smithton (Tasmania) site and that its Cobram, Kiewa and Allansford facilities in Victoria were likely to benefit from further investment.