AUSTRALIA – The Australian Competition and Consumer Commission (ACCC) has granted its approval for the proposed acquisition of two milk processing plants by national retailer Coles Group from Canadian dairy giant Saputo.

Coles, the second-largest supermarket chain in Australia, had signalled its intention to acquire Saputo’s facilities in Erskine Park, New South Wales, and Laverton, Victoria, for a sum of C$95 million (US$70.2 million.

Originally scheduled for September, the ACCC’s decision was delayed due to pending feedback from concerned parties.

The acquisition involved Coles taking over the processing of its own milk at the Erskine Park and Laverton facilities, which were previously managed by Saputo.

The ACCC scrutinized potential concerns related to Coles’ bargaining power in the dairy supply chain and fears that Saputo might exit the raw milk market in New South Wales.

ACCC Deputy Chair Mick Keogh stated that after careful consideration, the acquisition was deemed unlikely to result in a substantial lessening of competition.

The regulator acknowledged concerns raised by some dairy industry participants but concluded that the majority of the capacity at these facilities was already contracted to Coles.

As part of the approval, Saputo committed to maintaining the sale of its Devondale milk product in New South Wales and entered into a five-year toll processing agreement with Coles at the Erskine Park facility.

According to the ACCC, this deal will not negatively impact Saputo’s collaboration with dairy farmers in New South Wales for at least the next five years.

The regulator dismissed concerns about the acquisition affecting competition for other processors, citing significant excess capacity at the Erskine Park and Laverton plants.

Coles’ commercial incentives to consolidate its milk supply would exist regardless of the transaction, the ACCC noted.

Despite the ACCC’s approval, the Business Council of Co-operative and Mutuals (BCCM) expressed concerns, stating that the acquisition could reduce competition in the dairy market to the detriment of consumers and family farmers.

BCCM CEO Melina Morrison emphasized the potential impact on Australia’s domestic food security, export earnings, and income tax derived from the dairy industry.

In the long run, the acquisition’s effects on competition in the dairy market will unfold, and stakeholders will closely monitor how Coles manages its relationships with processors and farmers in the evolving landscape of Australia’s dairy industry.

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