Majors to milk distribution deal

A plan by Coles and Woolworths to take over the distribution of milk to their supermarkets is expected to lead to a major rationalisation of Western Australia’s milk distributors.

There are at least 100 milk distributors around WA working as contractors to major dairies National Foods and Peters & Brownes. To some, meeting the milk needs of the major supermarkets is a large part of their business.

The milk distribution plan is understood to be part of wider supply chain management readjustments at the major grocery chains.

Some industry sources have suggested the Coles and Woolworths plan to set up regional warehouses could result in the number of milk distributors being halved.

One source said the Coles and Woolworths move would take about 46 per cent of the volume out of the distribution sector.

“Therefore there has to be some form of rationalisation,” he said.

“How the companies are going to do that [National Foods and Peters & Brownes] is still up in the air.

Another source told WA Business News that National Foods had sent out a letter to its distributors advising them to consult with National Foods before making any business decisions.

“We’re on death row,” he said.

National Foods group executive corporate affairs Ian Greenshields said it was not the dairy company’s choice to cut the number of distributors but that there would definitely be pressure to rationalise their numbers.

He said both Coles and Woolworths were expected to move to regional warehouses within the next six months.

Peters & Brownes managing director Nigel Thomas said the supermarket chains’ decision was also a loss to his company.

“For us they are duplicating infrastructure that we already have,” Dr Thomas said.

“It means less products going through our warehouse.”

Coles and Woolworths have been discussing plans to take over milk distribution to their supermarkets with the major dairy companies for several months.

Neither Coles nor Woolworths representatives were able to comment on the time frame of any distribution chain changes or the cost benefits to the companies at this time.