Blog: Dean BestHow Parmalat has received another boost in Australia

Dean Best | 3 April 2014

Days after Parmalat announced it had acquired Australian dairy and fruit juice firm Harvey Fresh comes news of a deal of another sort for the Lactalis-owned Italian dairy giant.

Parmalat has secured a new, ten-year contract to supply milk to stores in the Australian state of Queensland owned by Woolworths Ltd, the country's largest retailer.

The milk processor was already Woolworths' nominated supplier in the state but the existing contract was for two years. The new deal is for an initial five-year period, with an option for a further five.

Woolworths also said it had awarded Parmalat a two-year contract further south in New South Wales.

The agreements, among a batch of contracts announced by Woolworths today (3 April), will cheer Parmalat, although, before the deals were announced, one industry watcher suggested the company may have been after more agreements.

"Parmalat ranks as the sixth-largest in terms of milk intake and is one of the two major milk processors in Australia. Its current business model has it very focussed on fresh milk and dairy products, which has meant a high level of exposure to the supermarket duopoly – probably not a strength. Parmalat hold the private-label supply contracts in New South Wales and Queensland. Woolies are to announce its next set of contracts tomorrow, and it wouldn't be surprising if Parmalat pick up a couple more," Jo Bills, director of food industry consultants Freshagenda, said yesterday. "Parmalat have taken a bit of hit from Coles awarding east coast contracts to Murray Goulburn and Norco, so I reckon would have been pretty keen in their negotiations."

Woolworths' latest contracts show Parmalat has not picked up new states - with deals elsewhere with Brownes Group, Fonterra and Lion.

However, its new agreements with Woolworths will provide a boost to Parmalat, which, through private-label contracts and M&A, bolstered its business in Australia.

Click here for our analysis of Parmalat's acquisition of Harvey Fresh, which includes the views of Freshagenda's Jo Bills and Rabobank's Michael Harvey.

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