FONTERRA Australia has secured a 10-year contract to supply Woolworths home-brand milk throughout Victoria in a deal that will create 30 jobs at Cobden.
The company will invest $30 million to refurbish the former National Foods plant which adjoins Fonterra’s Cobden factory. Bruce Donnison, Fonterra Australia operations and ingredients director, said the plant would be commissioned early next year and process 90 to 100 million litres of milk annually.
Announcing the project at the Cobden plant yesterday, Mr Donnison said the factory would need to source this amount of extra milk and he excepted it to come from increased production from the company’s 220 suppliers in the south-west.
He said the security of the long-term contract would provide farmers with the certainty to justify investment in boosting production.
“We’re confident that farmers will see this as an opportunity to confidently invest in expanding production,” Mr Donnison said.
The Cobden factory currently employs 160 and processes 340 million litres annually.
Mr Donnison said the Cobden site was chosen for the project because of the existing facility, which has been dormant since National Foods closed it in 2010.
Fonterra bought the building about 18 months ago.
“It’s a good facility,” Mr Donnison said.
“It’s only 12 years old and it already has a substantial part of the services we will need.
“It has more space than we need to meet this contact so there is room to grow.”
Woolworths, like Coles, sells home-brand fresh milk for $1 a litre. Mr Donnison said the use of cutting-edge technology made it viable to supply this market.
“There is margin for all — for Woolworths, for Fonterra and for farmers,” he said.
Mr Donnison said the Woolworths milk would be sourced from the company’s overall intake, not specific suppliers.
Opening of the new facility will provide more jobs than were lost when National Foods ceased UHT milk production at the site.
Mark Billing, a director of the Bonlac Supply Company which supplies Fonterra, said the contract was good news for south-west farmers.
Fonterra will be taking over the Woolworths supply from Japanese-owned Lion.
The Larpent farmer said the duration of the supply contract would be an incentive for farmers to invest in supplying the high quality milk needed for the venture.
The Fonterra-Woolworths contract mirrors a similar 10-year deal between Murray Goulburn Cooperative and Coles, due to start in July.
Murray Goulburn managing director Gary Helou has also defended the viability of the contract on the basis of highly efficient modern technology making it profitable for all parties.