Coles's Move for Saputo Processing Plants Raises Competition Concerns — Update

By Stuart Condie

SYDNEY--Australia's competition watchdog is concerned that supermarket operator Coles's proposed acquisition of two milk-processing plants from Saputo could reduce the long-term viability of dairy processors and farmers.

The proposed acquisition would result in a major structural change to dairy processing and mark the first time a supermarket operator has owned and operated its own milk-processing facilities, the Australian Competition and Consumer Commission said on Thursday.

The ACCC said its preliminary concerns included that Saputo could stop acquiring milk in Australia's NSW state with the divestment.

"This would leave limited competition in regions of NSW, which could result in farmers receiving lower prices for their raw milk," ACCC Deputy Chair Mick Keogh said.

Industry participants are worried that Coles would consolidate its private-label milk production, increase its bargaining power with processors and wholesalers, the ACCC said.

Reduced competition at wholesale could hit processors' long-term viability, with knock-on effects for farmers, the ACCC said.

Coles is already the largest customer for Saputo's facilities in Laverton North and Erskine Park, they also supply other milk products to retailers.

The supermarket operator said that it would continue to provide processing services to Saputo following the transaction.

"From Coles's perspective, we see no lessening of competition in any relevant market," Coles Chief Executive Leah Weckert said.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

July 19, 2023 20:32 ET (00:32 GMT)

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