ACCC Delays Decision on Coles’ Milk Processing Facilities Acquisition

Australia’s competition watchdog has delayed its decision regarding Coles, a local supermarket chain, purchasing two milk processing facilities. The Australian Competition and Consumer Commission (ACCC) was originally set to announce its findings on September 14 but is currently gathering additional feedback from concerned parties who had previously raised objections to the Coles-Saputo deal.

Coles, the second-largest supermarket in Australia, revealed plans in April to acquire two processing plants from the Canadian dairy company. The deal, valued at C$95 million (equivalent to $70.2 million today), involves sites in Laverton North, Victoria, and Erskine Park, New South Wales.

The ACCC initiated a review of the transaction in May and released preliminary findings in July, giving the involved parties until August 3 to respond to the initial assessments. According to the ACCC’s timeline, they are still awaiting further information from these parties and will announce a new deadline for their conclusions “in due course.” The ACCC declined to provide additional comments when contacted by Just Food.

In July, the ACCC noted that feedback from concerned parties included input from a “significant number of industry participants.” The regulator raised concerns that this deal could result in a significant structural change in Australia’s dairy sector. If approved, it would mark the first time a supermarket in the country “owns and operates its own milk processing facilities.”

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Coles currently sources raw milk from farmers in Victoria and New South Wales and processes it at these plants under an agreement with Saputo. The ACCC expressed concerns that this acquisition might change Saputo’s incentives to continue acquiring raw milk in New South Wales, potentially reducing competition and affecting milk prices for farmers in the region.

The ACCC is worried that Coles could gain increased bargaining power through this acquisition, potentially leading to reduced competition at the wholesale level, which could impact both processors and farmers.

In response, Coles stated that it would continue to cooperate with the ACCC and maintained that the acquisition would not lessen competition in any relevant markets. Coles CEO Leah Weckert emphasized that the company already processes about 80% of the volumes at the facilities and provides milk processing services to Saputo Dairy Australia under a tolling arrangement. She expressed confidence that any remaining concerns could be addressed to allow the proposed transaction to proceed as planned.

Source: Just Food