NSW-based Norco Co-operative has extended its contract to supply Coles’ discount-priced house brand milk in northern NSW and Queensland until 2023.
Norco and Murray Goulburn both started packing $1-a-litre Coles milk for its eastern Australian supermarkets almost three years ago.
The supermarket chain’s contracts with the two farmer co-ops prompted Norco to spend $6.4 million on plant upgrade at its Gold Coast site and resulted in MG building two new milk processing plants in Sydney and Melbourne.
Both took on extra suppliers so they could commit to the contracts.
About 220 NSW and Queensland dairy farmers are supplying about 60 million litres annually to fulfill Norco’s now nine-year-long contract.
Coles has an option to further extend the deal until 2026.
In December Norco also began packing a “Farmer Friendly” label milk exclusively for the NSW-based Harris Farm Markets after the grocer chain stopped stocking various $1/litre milk lines.
Norco said the new, expanded Coles deal would significantly assist it to almost double its current sales to reach an annual turnover target of $1 billion a year.
Chief executive officer, Brett Kelly, said the extension was an exciting step for the 121-year-old co-op.
“We expect to grow to a collective sales turnover of approximately $1b in coming years and Coles will play a substantial part in this growth,” he said.
Norco would also use the security of the long-term contract to commit to further investment in enhancing supply chain efficiency.
As part of its relationship with both co-ops Coles committed to stocking its shelves with other dairy lines, such as cheese, spreads and ice cream from Norco and MG’s Devondale brands.
Norco now has about 30 different products stocked in Coles stores and makes Coles’ house brand ice cream.
Mr Kelly said Norco put on 22 extra staff and signed on 74 new farmers to supply milk when it began servicing the Coles milk contract in July 2014.
“Norco’s milk sales increased by 60 per cent in the past two years, contributing substantially to the co-op’s collective sales growth of 33pc,” he said.
“The extension of our contract for Queensland and northern NSW gives surety to our dairy farmers and the confidence to reinvest and grow their production as the contract volume grows.”
He said the extended contract was good news for dairy farming in the sub-tropic supply region and significant in terms of building the Queensland market and encouraging long-term reinvestment in the industry.
Extending the contract would also improve Norco’s brand profile and “increase consumer awareness of farmers working together with retailers.
Coles state general manager Jerry Farrell said the extension of the contract was evidence of its confidence in Norco.
“Norco is one of the longest standing dairy co-operatives in Australia, which continually grows by taking on new opportunities in the dairy sector. “We’re delighted to extend the partnership with such a reputable company with has such high standards for quality.”
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
