MURRAY Goulburn claimed the loss of a number of Woolworths contracts will cost the dairy processor $108 million in revenue annually.
Following a competitive tender process, Woolworths has selected new suppliers to manufacture its private label products including cheese, UHT milk, adult milk powder and cream.
Contracts were awarded to Bega Cheese for cheese , Fonterra for adult milk powder, and Pactum and Harvey Fresh for UHT.
Fonterra will provide cream in Victoria, with Parmalat and Bulla elsewhere.
Murray Goulburn retains the contact to supply private label shredded mozzarella cheese, as well as butter, for which the contract has been expanded, with additional products and increased ranging.
Murray Goulburn will adjust future manufacturing planning to redirect capacity to other markets, limiting future revenue and earnings impacts.
The Woolworths contracts will expire in January, a month before MG’s $130 million deal to supply private label cheese to supermarket rival Coles begins.
MG signed a 10-year deal to supply Coles with private label milk last year.
MG interim chief executive David Mallinson said the company continued to enjoy a strong ongoing relationship with Woolworths.
“We believe our tender to retain this business was competitive, whilst balancing acceptable returns for our products given the current environment for our farmer-suppliers and investors,” he said.
“I can also re-assure our valued consumers that ranging of MG’s Devondale and Liddells products are not impacted by this decision and continue to be available at Woolworths nationally.”