John Cobb (Calare, National Party, Shadow Minister for Agriculture and Food Security) Share this | Hansard source

by leave—I move:

That this House:

(1)

notes with concern the impact on the Dairy Industry of the Coles milk pricing strategy, and that:

(a)

dairy farmers around the country are today seriously questioning their future, having suffered through one of the worst decades in memory including droughts, floods, price cuts and the rising cost of inputs such as energy and feed;

(b)

unsustainable retail milk prices will, over time, compel processors to renegotiate contracts with dairy farmers and the prospect that these contracts will be below the cost of production may force many to leave the industry;

(c)

for many dairy farmers, the fact that supermarkets are now selling milk cheaper than many varieties of bottled water will be the straw that finally breaks the camel’s back; and

(d)

the risk of other potential impacts include:

(i)

decreased competition as name brands are forced from the shelves; and

(ii)

the possible loss of fresh milk supplies to some parts of the country as local fresh milk industries become unviable; and

(2)

calls on the Government to:

(a)

ask the ACCC to immediately undertake an investigation into the big supermarkets and milk wholesalers after recent price cuts to ensure they do not have too much market power and are not anti-competitive in their behaviour; and

(b)

support the new Senate inquiry into the ongoing milk price war between the country’s major supermarket chains.

The dairy industry has faced many challenges over the years; however, with the current milk price war, dairy farmers and their families across the nation are questioning their future in the industry, having endured a decade of severe droughts, floods, cyclones, increasing operational costs and cuts to farmgate prices. There are over 100,000 people employed in the dairy industry in Australia, mostly in rural and regional areas. It is Australia’s third largest rural industry, with a value of $3.1 billion at the farmgate—or it has been. Just as importantly, the industry provides all Australians with a sustainable, daily supply of fresh, high quality milk and a wide range of dairy products.

For feeding our nation and contributing so much to our economy, all dairy farmers ask and have asked for is a fair day’s pay for a fair day’s work. However, the launch of Coles’s—a wholly-owned subsidiary of Wesfarmers—cutthroat milk discount campaign on Australia Day has devalued milk and savaged the morale of dairy farmers right across the nation. Coles has now made it impossible for dairy farmers to get a fair day’s pay for a fair day’s work. They have dropped the price of milk to $1 a litre. The last time milk was priced at $1 a litre was in 1992. Dairy farmers would like to ask the customers of Coles two things: could they pay their bills if they went back to their 1992 wage? Do they really believe Coles when they say they are absorbing the cost of these 1992 prices? Dairy farmers are pretty logical and pragmatic people, and they know a bulldust story when they hear one.

Coles is a wholly-owned subsidiary of Wesfarmers, a company that was started by farmers as a cooperative in Western Australia and was still controlled by them when it went public in the mid-1980s. They have written to many members who are sitting in this House today and they have claimed publicly and have promoted to their customers that the discounting of milk to $1 per litre will not affect dairy farmers—a load of bull. Their claim could not be further from the truth. Coles are marketing milk discounted to at or below cost to lure customers from their competitors while at the same time growing their market share with their own brand of milk. The effect has been the devaluing of milk right across the nation as retailers competing with the Coles brand of milk have had to drop their prices to try to protect their market share. They have also had to discount their own brands of milk to try to retain their sales. Dairy farmers who have their prices linked to processors’ brands have already seen their milk cheques reduced. Processors will be put under pressure with their next contract negotiation with retailers and then dairy farmers will be put under more pressure

Vendors and distributors are losing deliveries hand over fist with key milk-production markets in New South Wales and Queensland dropping by more than 15 per cent in Queensland and 10 per cent in New South Wales in the last 12 months. This includes farmers who supply milk which goes into Coles supermarket-branded milk bottles. Coles is totally owned by Wesfarmers, who actually have agribusiness people on their board and cannot claim that they do not know what this means. This provides clear evidence that Coles’s claims are wrong or, worse, they have been tricky and purposely selective in quoting facts and figures to mislead Australians. Their public claims are tantamount to false advertising.

I am amazed that the Minister for Agriculture, Fisheries and Forestry and former agriculture minister Burke have both publicly supported Coles ahead of the dairy industry, despite supermarkets now selling milk cheaper than most brands of bottled water. Coles is not going to absorb over $60 million per annum which this discount will cost them; it just will not happen. To believe that Richard Goyder plans to go to the next Wesfarmers AGM with the story of Coles’s drop in profit and market share is farcical. Farmers know that soon they will be paying for Coles’s marketing tactics. Let us remember that Coles is a wholly-owned subsidiary of Wesfarmers. This is not some global company; it is acting like one, but this is a wholly-owned subsidiary of Wesfarmers, who were an icon for Australian industry in how to succeed. But not any longer.

While Coles said it had reduced the price of 5,000 products, it has been silent on what has happened to the price of the 15,000 other products sold in the supermarket. By using tricky marketing tactics like this unsustainable milk price cut, Coles is trying to lure in more customers. Recently the Managing Director of Wesfarmers, Richard Goyder, was quoted as saying that what Coles is doing is hopefully increasing demand for milk. Given Mr Goyder’s pay grade, I would have thought he would understand a little basic economics. Even I understand that the demand for drinking milk is pretty inelastic. Consumers buy and use only a certain volume. We are not going to see customers across the country saying, ‘Gee, milk’s cheap; I’ll have another bowl of cereal,’ or ‘Gee, milk’s cheap; I’m not going to have a beer today. I’m going to go to the pub and ask for a milk.’ Mr Goyder must know this.

These tricky marketing tactics are hurting not only dairy farmers but also small businesses across the nation, and it will only get worse. We all love the convenience of the local corner store. Well, Coles is doing them out of business. Coles, a wholly owned subsidiary of Wesfarmers, is also hurting vendors and the independent petrol stations. It is hurting small business everywhere, which is what Coles is pursuing so that it can grow its own business over the demise of others.

Coles has imported from the UK a whole bunch of British executives who are experts in store brand tactics and taking business from others. But they are currently implementing a strategy that is not right for Australia and certainly not right for a company like Wesfarmers, with the reputation they previously enjoyed. Coles has about doubled its share of the milk market over the last 10 years with its discounted supermarket milk brand. In countries like the UK, you now have to send out a search party to find an independent brand. What happens to consumers when they are left with no choice—and at what price? Dairy farmers do not, and should not, trust Coles—and neither should their customers when it engages in these practices.

Coles, a wholly owned subsidiary of Wesfarmers, needs to stop being tricky and start charging fair prices for its milk supplies. Woolworths and other retailers have stated both publicly and privately that these price cuts are unsustainable—and they must be in a very similar position to Coles. Competition needs to be fair and, in this case, the umpire needs to step in and red card Coles and its team of UK executives. I have asked the ACCC to look at the milk price cuts, and the motion calls on the government to do the same. For all of our futures, in an environment of tightening food supplies and a greater emphasis on food security, these unscrupulous practices of big retailers need to stop. We need to focus on sustaining our critically important food producing industries instead of squeezing them out of business.

I knew the previous chief executive of Wesfarmers. He was a person I was proud to know. He gave Wesfarmers a great name and they were an icon and a success story in Australian business. He took them from a $1 billion enterprise in the mid-eighties up to the multibillion dollar enterprise that they are today. I think he would be horrified at what his company’s subsidiary is doing today. I ask that the House support the dairy industry and back this very important motion.

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