The Australian Competition and Consumer Commission wants submissions on plans by Coles to buy two fresh milk-processing facilities from Saputo.
The ACCC kicked off a public merger review of the proposed acquisition on May 2.
Some farmer groups have expressed concern about the proposal - and want assurances it will not impact the farmgate milk price.
Coles announced last month that it planned to buy milk factories in Erskine Park in Sydney and Laverton North in Melbourne from the Canadian giant for $105 million.
The plants produce fresh milk for Coles own branded products, as well as for Saputo's Devondale brand and for other parties.
The ACCC said Coles was the primary customer at both facilities with its own brand fresh milk products accounting for the majority of the annual volumes produced.
"Coles does snot currently own or operate any dairy processing facilities," it said.
"Saputo's milk supply contracts are not included in the proposed acquisition, with the contracts Saputo holds with NSW and Victorian dairy farmers being retained by Saputo on current contractual terms."
The ACCC said its investigation was focused on the impact of the proposed acquisition on competition.
In particular, it is looking at:
- the impact on prices or terms of supply farmers receive for their raw milk in NSW and Victoria;
- the impact on prices for fresh milk processing services in NSW and Victoria; and
- whether the proposed acquisition is likely to give Coles the ability and/or incentive to foreclose other dairy processors, wholesalers or retailers.
The two huge plants were built by former farmer co-operative Murray Goulburn as part of its ill-fated push into the Australian domestic fresh milk market.
The Laverton North facility cost $80 million and was opened in 2014, while the Erskine Park plant cost $60 million and was opened in 2015.
Each facility has the capacity to process around 225 million litres a year.
The factories were part of a 10-year deal between Murray Goulburn and Coles for the supermarkets house-brand contract.
The Coles contract with the co-op started in 2014 and cut out foreign-owned Lions and Parmalat, which had previously held the contracts for the fresh milk market in Australia's two most populous states.
But there were concerns that the deal locked in $1 a litre milk.
At the time, Coles said it was confident it could keep selling milk for $1/L and still pay a premium to farmers, which would be adjusted regularly in response to national market trends.
Murray Goulburn sold to Saputo in May 2018 for $1.31 billion.
From the outset, Saputo had concerns about the deal with Coles.
Even before the takeover was completed, Saputo was looking closely at the profitability of the plants in Melbourne and Sydney, and their cheap supermarket milk supply contracts.
More information on the ACCC inquiry is available at its public register.
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Carlene Dowie
Carlene Dowie is the editor of the Australian Dairyfarmer magazine and has more than 30 years' experience as a rural journalist.
Carlene Dowie is the editor of the Australian Dairyfarmer magazine and has more than 30 years' experience as a rural journalist.
