Murray Goulburn loses $100 million Woolworths private label contract

MURRAY Goulburn, the dairy co-op that supplies Woolworths’ private label range, has taken a $100 million hit.

WOOLWORTHS has dumped the supplier of its private label dairy products, in a further blow to troubled producer Murray Goulburn.

The dairy co-operative, which supplies rival supermarket chain Coles with its $1-a-litre milk, outraged farmers when it slashed its farmgate milk price earlier this year.

Now it’s about to take a $108 million hit, with its annual contract to supply Woolworths private label products including cheese, UHT milk, adult milk powder and cream in tatters.

Bega has nabbed the cheese contract, while Freedom Foods Group will supply the UHT milk.

Murray Goulburn says it will lose $108 million in revenue, but that the impact on its annual results will be limited because it plans to “redirect this capacity to other markets” overseas.

“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,” Murray Goulburn interim chief executive David Mallinson said in a statement on Friday.

The co-op has retained the contract to supply private label butter and shredded mozzarella, and its 10-year deal to supply Coles private label milk remains intact.

“Murray Goulburn continues to enjoy a strong ongoing relationship with Woolworths and they remain a valued partner for our co-operative,” Mr Mallinson said.

“I can also reassure 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.”

Murray Goulburn is Australia’s largest dairy foods company, with annual turnover of approximately $2.9 billion and more than 2500 supplier shareholders.

It has had a tough year since listing on the sharemarket as the MG Unit Trust, with profits downgraded and a public-relations nightmare ensuing when it slashed the price it pays farmers for milk solids in April.

Last month, Murray Goulburn announced its opening price for next season will be $4.31 per kilogram of milk solids — the lowest it’s been since 2009, and well below the cost of production.

A consumer boycott on cheap milk pushed Coles into announcing a new, more expensive home brand that would help struggling farmers.

And a class action is brewing by investors who claim the co-op misled them, Slater and Gordon told the ABC.

The Federal Government has provided loans of up to $1 million or 50 per cent of the existing commercial debt of the business over 10 years to help out farmers.

— With AAP