Dollar a litre milk: Ex-Woolworths boss John Dahlsen outlines plan for dairy sector into the 2020s
With more than five decades of retail experience under his belt, John Dahlsen knows what makes supermarkets tick and has a plan to redress the retailer-farmer imbalance in dairy.
WOOLWORTHS, Herald and Weekly Times, ANZ Bank — John Dahlsen has been at the decision-making table for all three household names.
He’s arguably best known by Victorian shoppers as the chairman of his eponymous hardware company JC Dahlsen.
So it’s fair to say the veteran of the corporate boardroom knows what makes retail tick.
That’s why Mr Dahlsen is so incensed with the conduct of not only Woolworths but competitors Coles and Aldi when it comes to fair returns for Australian dairy farmers.
This week marks a decade since then Coles chief executive Ian McLeod shocked the agricultural world by reducing the price of the supermarket’s generic brand milk to one dollar a litre. Woolworths and Aldi swiftly followed back in January 2011.
The generic price gridlock lasted eight years until Woolworths pushed the figure to $1.10 a litre in early 2019, allowing the two retail rivals to follow suit.
All three supermarket giants now sell their house brand milk at $1.20 a litre — a figure considered too low by dairy lobby groups in every state.
Last year, Mr Dahlsen released a 107-page report detailing how Australian milk prices were exceedingly low compared to other developed nations.
In what has been dubbed ‘The Dahlsen Plan’, the report outlines how a government-mandated levy could inject much needed price stability into the sector while having little impact on Australian consumers.
The report outlines that a 20-cent levy on every litre of milk on supermarket shelves - fresh white through to UHT and flavoured - would return 6.7 cents-a-litre to each dairy farm.
A 30-cent levy would 10 cents-a-litre to the farmgate while a 40 cent levy would have a flow-on effect of 13.3 cents-a-litre.
Products emanating from milk solids such as butter, yoghurt and cream do not form part of the levy proposal.
Under the plan, an independent national body would collect the revenue raised and distribute it to Australia’s farmers.
Mr Dahlsen stipulated that Dairy Australia should not serve as the independent entity.
“Australians pay an extraordinarily low price for milk. Under the levy system I’ve proposed, they would still pay a pretty reasonable amount while ensuring a sustainable future for the sector,” Mr Dahlsen told The Weekly Times.
“Australian dairy farmers are leaving the industry and who can blame them? The current trajectory for our dairy sector ensures further decline in the coming decade.
“Under my proposal, a 40 cent levy is the most desirable outcome. At 20 cents, the farmer will only get to break-even point.”
The plan has received support from a number of dairy lobby groups, as well as grassroots support — particularly in Victoria’s Western District.
Australia’s dairy industry underwent deregulation under the Howard Government in 2000 and while two decades on, the Dahlsen Plan represents a re-regulation of the price, Mr Dahlsen said circumstances within the sector had significantly changed since the turn of the century.
“Clearly, deregulation has failed,” Mr Dahlsen said.
“I have no vested interest in the dairy sector. I’ve released this plan as a concerned Australian who wants to see our primary producers to be properly remunerated for their efforts.
“I have plenty of experience when it comes to competition law. When I see that the public interest is not being served, I think it is worth examining why that’s the case and offering practical solutions to address the situation.”
On the question of whether the Dahlsen Plan would violate World Trade Organisation rules, Mr Dahlsen has consulted Melbourne University international trade expert Gary Sampson.
Professor Sampson cleared the concept in a letter to Mr Dahlsen as the levy would be paid by the consumer and not constitute direct government intervention.
“Australia has followed WTO rules to the letter, yet many European nations and the United States act as if there’s never-ending flexibility.”
As the decade milestone of dollar-a-litre milk passes, Australian Dairy Farmers president Terry Richardson has reiterated the organisation’s call for generic milk to be priced at least $1.50 a litre by the major supermarkets.
Coles, Aldi and Woolworths did not indicate any change to their respective house brand milk prices when contacted by The Weekly Times.
A Dairy Australia spokesman said: “The introduction of dollar a litre private label milk on Australia Day ten years ago has had a significant impact on the Australian dairy industry.
“It hit a raw nerve with farmers and defined the industry in the eyes of many consumers. “While debate on the economic impacts of the supermarket retail policy has continued, there is no question that retail discounting affected the perceived value of dairy and also weighed heavily on farmers.”
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