Fonterra Cooperative Group [NZX:FCG], New Zealand's dominant dairy exporter, has won a contract to supply Woolworths home-brand milk in the Australian state of Victoria for the next 10 years, wresting the previous one-year supply agreement off Japanese Kirin-owned Lion.
Fonterra's Australian unit will early next year commission a A$30 million upgrade to its Cobden milk processing plant in Victoria to support the contract for 67 million litres of milk a year from local farmers, the companies said in a joint statement.
Woolworths and its smaller supermarket rival Coles, owned by Wesfarmers, are offering longer contracts to suppliers, giving milk processors and farmers greater certainty for investment. Fonterra, which counts Australia as its second-largest milk pool outside of New Zealand, said the investment in Victorian plant will support 30 new jobs.
Woolworths sells about 330 million litres of milk a year through its Select home brand range, which retails at A$1 a litre.
Fonterra's Australian sales were worth $847 million in the six months ended Jan. 31, compared with total sales of $11.3 billion.
Fonterra and Woolworths are finalising contractual arrangements, the companies said.