Fonterra Australia signs 10yr deal with Woolworths

The proposed long-term arrangement will give farmers certainty that will allow them to invest in their businesses with the confidence that they have a guaranteed buyer for their milk, they say in a joint statement. Woolworths' existing contracts were for a period of one year.

Woolworths Own Brand milk sold in Victoria will be made and processed in Victoria, supporting local farmers and jobs in regional communities.

The proposed deal will see Fonterra investing more than $30 million into a state-of-the art milk processing plant at its Cobden site in South West Victoria.

The investment will support 30 new jobs at the Cobden facility and have positive flow-on effects for farmers and communities in southwest Victoria. Fonterra and Woolworths will continue to work together to finalise contractual arrangements to reach a binding supply agreement.

Woolworths managing director of supermarkets, Tjeerd Jegen, says the new contract will be a win for farmers, Woolworths customers and Victoria.

"We want farmers and Fonterra to provide quality milk for our customers. Fonterra has told us that with the certainty of a long-term contract they and their farmers can invest and innovate," Jegen says.

"Changes like integrated seals for milk containers and new, state-of-the-art processing equipment would not be possible without the investment brought about by this certainty. It's these innovations that will see better tasting, fresher milk available in Woolworths stores. We hope our customers will enjoy the difference.

"We don't want to see milk shipped long distances which only adds cost and increases the time between the farm and the supermarket shelf. These new contracts mean local farmers will supply Victorian milk to Victorian families."

Fonterra Australia managing director Judith Swales, pictured, says Fonterra is excited to partner with Woolworths in this milestone initiative.
"This proposed arrangement will help us deliver on our strategy to provide healthy, nutritious dairy foods – in every dairy category – to Australians. It expands our current white milk portfolio complementing our Riverina Fresh milk business in New South Wales.

"Using Fonterra's global innovation leadership and the high-quality milk from our farmers, we can optimise the freshness and shelf life of milk to ensure a better product for Woolworths Victorian customers.

"Just as importantly, the proposed arrangement will provide certainty for dairy farmers so they can invest on farm and grow their milk production. Australia is our second largest milk pool outside of NZ, so we take a long-term view and aim to deliver profitability, growth and sustainability in the Australian dairy industry."

The contractual arrangements are being finalised by the parties. The modernised facility at the Cobden site will be commissioned in early 2015.