Coles and Aldi to stop selling $1 a litre milk following campaign by dairy farmers

Coles and Aldi will from this morning ratchet up the price of their milk to match the shift in pricing by Woolworths.

Queensland dairy farmers protest inside a Coles supermarket store in Brisbane, earlier this month. Picture: AAP

Coles and German discounter Aldi, the nation’s second and third biggest supermarket chains, will from this morning ratchet up the price of their private-label milk to match the shift in pricing by Woolworths last month as the supermarket heavyweights come under increasing pressure from politicians and the farming community to divert stronger returns to dairy farmers.

Coles announced last night it would lift the price of two-litre and three-litre milk by 20 cents and 30 cents respectively. Aldi’s increases are identical, and ­additional proceeds will be passed on to dairy farmers in full.

The decision will spark interest in debate among industry participants and policymakers, including a point of discussion at The Australian’s Global Food Forum, which kicks off today and whose keynote speakers will include Rod Eddington, chairman of one of Australia’s biggest milk processors, Lion, and Patrick Noone, boss of burgeoning US supermarket chain Costco.

Milk has become a major political battleground as some politicians look to grill the grocery retailers to hand over more of the profit pool to dairy farmers who have struggled in the face of drought, collapsing milk prices and rising input costs.

The $1-a-litre milk price wars began in 2011 when Coles slashed prices and Woolworths followed suit, but the supermarket faced public and political pressure to charge more for milk and pay farmers more.

Last month, Woolworths took the lead by increasing the price of two ­litres of milk to $2.20.

Aldi, which is the country’s third biggest supermarket chain with more than a 10 per cent stake of the $90 billion grocery sector, has moved. Coles, not to be left out, has also acted.

Queensland dairy farmers protest outside a Coles supermarket store in Brisbane. Picture: AAP

However, Aldi concedes the price hike represents a “short-term solution’’ to an industry- wide problem that demands co-ordination of federal and state governments to lead structural reform of the dairy industry.

“The health and viability of Australia’s primary producers is an issue of national importance,’’ Aldi chief executive Tom Daunt told The Australian.

“As the CEO of a major supermarket, I shoulder a direct responsibility to ensure that my organisation is having a positive impact on our important and valued food producers. The dairy sector has unique problems that cannot be solved by retailers alone; it requires government led structural reform.

“In the last week, it has become clear we cannot wait until the government take action; we must further contribute to both short and long-term solutions.”

Mr Daunt said Aldi had absorbed recent price increases and chosen not to pass them on to ­customers.

Coles said that in support of Australia’s dairy farmers, it would also increase the price.

“Coles is currently paying dairy processors the highest farm gate milk prices in four years, without passing on the added expense to customers. However, it is clear that many dairy farmers, particularly in northern Victoria, NSW and Queensland, are struggling as a result of drought,’’ Coles said last night.

Coles will work with dairy processors to ensure that the benefit of this retail price increase will go directly to farmers who supply Coles brand milk.

“Coles sources 100 per cent of our Coles brand fresh milk from Australian farmers, many of whom are struggling as the impact of drought compounds ongoing challenges in the dairy industry,” Coles chief executive Steven Cain said.

“Coles supports proposals to make Australia’s dairy industry more sustainable, and we are continuing to explore long-term ­solutions with government and industry stakeholders.”