Coles is keeping milk prices higher than before the Iran war, despite ending subsidy payments to farmers that the supermarket giant used to justify stinging consumers at the checkout.
In late April, Coles raised the price of its own-brand milk by 20¢ to $1.85 for a one-litre bottle to assist dairy farmers with higher production costs that skyrocketed after the United States’ war on Iran blocked the Strait of Hormuz.
Last month, Coles wrote to its milk suppliers to announce that the subsidy payments, which began on May 1, would cease on September 8, but the supermarket giant has only reduced the price of a one-litre milk bottle by 10¢, or half the initial increase.
Lactalis, a global dairy company that supplies Woolworths, has also axed subsidy payments to its farmers. Woolworths did not respond in time for publication to questions about whether it had changed shelf prices in response, but a spokesman confirmed it was still making subsidy payments.
“Coles has continued to evaluate market conditions and following the latest review, Coles has made the decision to conclude the temporary payment,” wrote Coles general manager of bakery, dairy and frozen goods Brad Gorman in an email to suppliers on August 14, which was seen by this masthead.
“The team will continue to monitor market conditions, including diesel and fertiliser costs, and assess any ongoing impacts.”
Supermarkets have been at pains to convey they are lowering shelf prices for shoppers grappling with the rising cost of living, but are also contending with cost pressures of their own – including staff wages and energy and fuel prices – and from suppliers.
Coles also provided a one-off payment of $1 million that was shared among dairy farmers directly supplying to the supermarket.
Since the support payments ended, Coles has not returned the cost of its one-litre milk to $1.65 but has been selling it for $1.75. Its two-litre bottle, which increased from $3.20 to $3.55 for four months, is now $3.40. Its three-litre bottle rose 50¢ from $4.65 to $5.15, but is now $4.95.
A Coles spokeswoman said the company was “pleased to have reduced the price of selected Coles Brand milk products, helping deliver more value for customers at the checkout”.
“Milk prices reflect a range of costs across the dairy supply chain,” she said. “While some of the pressures we saw earlier in the year have eased, other costs remain elevated. We regularly review our prices and, where we can, look to pass on savings to customers as cost pressures ease.”
Australian Dairy Farmers president Ben Bennett said the supermarkets had made a “big song and dance” about how much of the temporary increase was flowing through to farmers and processors, but said only about 5¢ of a 20¢ increase actually flowed to suppliers.
“[The supermarkets] continuously masquerade as lambs, but they’re wolves,” Bennett said. “They’re quite frankly opportunists, and that’s not healthy for a sustainable industry. That hubris character they’ve got is because they’ve got so much power.”
Woolworths, which is selling a litre of milk for $1.75, said in late April that it would pay a small pool of farmers supplying directly to its Farmers Own milk an extra 10¢ per litre. It displayed customer notices in milk fridges that stated: “To support dairy farmers and processors we have increased the price of Woolworths Own Brand milk.”
Lactalis introduced a temporary 5¢ per litre payment to farmers that kicked in on May 1, but confirmed this was concluding at the end of September in correspondence seen by this masthead.
Lactalis’ general manager of milk collection, Paul Lorimer, said in an email that while costs remain elevated, “they have eased significantly from earlier peaks.”
“We understand farm costs remain a key focus and we will continue to monitor market conditions,” the email said.
Lactalis did not respond to a request for comment by deadline.
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Jessica Yun is a business reporter covering retail and food for The Sydney Morning Herald and The Age.Connect via X or email.From our partners
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