Coles buying milk processing facilities from Saputo Dairy Australia

Coles Group has announced that it will acquire two automated milk processing facilities from Saputo Dairy Australia (SDA) for approximately $105 million — one processing facility is located in Laverton North (Vic) and the other is in Erskine Park (NSW), close to Coles’ distribution centres.

Each facility has the capacity to process around 225 million litres a year and they are predominantly used today to process Coles Own Brand 2 and 3 L milk.

According to Coles’ CEO Steven Cain, the acquisition will improve security of milk supply in the dairy sector, consolidate its milk production and has capacity to facilitate growth through further product innovation.

“The acquisition will build on the strong relationships we have developed with our dairy farmers since launching our direct sourcing model in 2019. Around 90 dairy farmers supply milk direct to Coles, allowing these farmers to invest for the future and ensuring the long-term sustainability of their farms,” Cain said.

“These processing facilities will complement our existing investments in our Own and Exclusive brand portfolio and manufacturing capabilities in areas such as convenience meals and meat.”

Other examples of Coles bringing manufacturing in-house include:

• the construction in 2015 of an automated retail-ready meat and poultry manufacturing facility in Erskine Park (NSW) to secure supply and improve shelf-life of meat products;
• the acquisition in 2020 of the Jewel Fine Foods (now Chef Fresh) ready-made meals facility in Mascot (NSW). Additional automation has subsequently been added to this site.

The divesture is intended to enable Saputo to further streamline its operating model, adjust its manufacturing network to strengthen market competitiveness and allow it to reinvest in areas of the business that will result in more value creation opportunities.

“We’re continually working to ensure we have the right manufacturing footprint and product offering to enhance our position as a high-quality, low-cost processor,” said Lino A Saputo, Chair of the Board, President and CEO. “This marks an important step in executing our long-term vision for success in Australia as we maintain a sharp focus on efficiency to ensure we maximise the return on every litre of milk.”

SDA site-based employees at both facilities will be offered employment contracts with Coles.

Coles and SDA will also enter into transitional services arrangements to ensure a smooth handover to Coles.

The acquisition will be funded from Coles’ existing debt facilities and is subject to ACCC approval and other customary closing conditions, and is expected to be completed in the first half of the 2024 financial year.

Image credit: iStock.com/Sam Edwards