Woolworths takes direct approach with dairy farmers

3 April 2013

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3 April 2013 | Adam Leach

Australian retailer Woolworths aims to build deeper, longer-term relationships with its milk suppliers by contracting them directly.

The company is to trial the direct approach with a group of farmers from the Manning Valley in New South Wales. Negotiations between the two parties will commence once the Australian Competition and Consumer Commission gives the farmers the go-ahead to bargain as a collective. A decision is expected within the next two weeks.

Assuming the trial goes ahead, Woolworths – the largest supermarket and grocery chain in Australia – expects be taking delivery directly from farmers by the middle of 2013. It will be the first supermarket in the country to do so.

The company believes the approach will mean a better deal for farmers, enabling them to cut out the margin taken by intermediaries, and also a closer and longer term relationship with their dairy supply chain.

Pat McEntee, general manager of fresh food at Woolworths, said in a statement: "This trial will not be the silver bullet to fix all the problems, but we think it could herald a new way of delivering better returns to farmers and a more efficient supply chain."

Tim Bale, a dairy farmer from the region, said: "We think this trial has the potential to provide a much better deal for farmers in the Manning Valley. Our aim is also to secure longer term contracts, which will give us the confidence to invest in our businesses for a sustainable future."

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