Coles choice of Murray Goulburn rattles Bega Cheese private label cheese business
Victorian-based dairy processing giant Murray Goulburn dairy co-operative will be replacing Bega Cheese as Coles’ private label cheese supplier from January 2017.
Bega Cheese has been providing cheese sold under Coles private label brands since 2012. The dairy producer now says it will now be turning to the booming infant formula market to help fill the profit gap.
“The change in supply arrangements at Coles will see Bega Cheese redirect the related milk supply to other value added dairy products and markets including our rapidly growing infant formula and nutritionals platform,” Bega Cheese said
“The focus on higher value product mix and markets is consistent with the strategy of the business and will see a significant decrease in inventory holding for the company with up to $60 million of cheese inventory being realised as a result of the change of supply arrangements with Coles,” Bega Cheese said.
Bega branded products will continue to be sold at Coles supermarkets and the dairy producer says it expects to manage the change in its business mix in a way “which will sustain underlying financial performance and trajectory of the business.”
Murray Goulburn given five year contract
Murray Goulburn (MG), which owns the Devondale brand, said it has been awarded a five year contract.
“Today’s announcement follows the landmark, ten-year partnership MG commenced with Coles in 2014 to supply daily pasteurised milk for Coles private label brands in Victoria and NSW,” Murray Goulburn said.
“The contract includes the supply of a range of Coles brand cheddar-style cheese including tasty, colby, mild and light cheese in blocks, shreds and slices for Coles supermarkets across Australia. The national cheese contract will generate approximately $130 million in additional sales per annum and importantly deliver a stable stream of profits to MG over the life of the contract,” Murray Goulburn said.
About Murray Goulburn
The Murray Goulburn dairy co-operative was established in 1950 after a group of Victorian farmers joined together in hopes of getting better prices for their milk.
The co-operative now considers itself “Australia’s largest dairy foods company”. It sells a large variety of milk, butter, cheese and other dairy products under the Devondale and Table Cove brands. It also sells lactose-free dairy products through its Liddells brand. Approximately half of its products are exported overseas with the co-operative focusing on the emerging markets of China, South East Asia and the Middle East/North Africa.
Murray Goulburn floated on the Australian Securities Exchange (ASX) in July 2015 in order to raise AUD$500 million in capital to fund its overseas expansion.