Private label deals: MG replaced by Bega for Woolworths in dairy, while Coles locks in a ten-year lamb deal

Posted by AFN Staff Writers on 1st August 2016
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Murray Goulburn (MG) has lost its contract to supply a number of private label dairy products to Woolworths supermarkets, with the work instead going to Bega Cheese.

At the same time, Coles supermarkets has locked in a ten-year meat supply contract with the Australian Lamb Company (ALC). ALC will supply Coles with at least 1.1 million lambs per year.

MG said it lost the contract, which includes manufacturing and packaging cheese, adult milk powder and cream, after a “competitive tender process”. The company however noted that it will still be producing Woolworths private label mozzarella shred cheese and butter. Under the new contract Woolworths’ private label butter range has been expanded.

It is expected MG will lose approximately AUD $108 million in revenue because of Woolworths’ decision to change over to Bega. MG however maintains that the contract lost will have limited impact on its 2017 financial year results because of the timing of existing contracts being completed. It says it will also adjust its future manufacturing to redirect efforts to other markets so there will be limited impact on future revenue and earnings.

Interim Chief Executive Office at MG, David Mallinson, said that MG continues to enjoy a strong ongoing relationship with Woolworths.

“We believe our tender to retain this business was competitive, whilst balancing acceptable returns for our products given the current environment for our farmer, suppliers and investors,” Mallinson said.

“I can also re-assure our valued consumers that ranging of MG’s Devondale and Liddells products are not impacted by this decision and continue to be available at Woolworths nationally,” he said.

Bega Cheese to take over from January 2017

Bega Cheese said it was pleased to be taking over the production of the dairy products.

“Bega Cheese Limited is please to advise that it has reached agreement with Woolworths Supermarkets for the supply of a significant component of Woolworths’ own label cheese range commencing in January 2017,” the company said in an Australian Securities Exchange statement.

The MG contract lost comes after MG and other dairy companies made headlines earlier in 2016 after deciding to cut the farmgate milk prices paid out to its farmers.

Coles signs ten-year lamb contract with ALC

Coles supermarket ten-year lamb contract with the Australian Lamb Company is its first ten-year meat supply contract.

ALC has two processing facilities, one in Melbourne and one in Colac in regional Victoria. The company exports to over 60 companies worldwide. It is a privately-owned family business headed by John Verrall and Denis Zarpellon.

ALC owns multiple brands including Ambassador Premium Lamb, Sovereign Lamb, 1788 Mutton and Everdene Oak lamb.