The proposed long-term arrangement will give farmers certainty that will allow them to invest in their businesses with the confidence that they have a guaranteed buyer for their milk, both companies said.
Woolworths’ existing contracts were for a period of one year.
It also meant that all Woolworths Own Brand milk sold in Victoria will be made and processed in Victoria, supporting local farmers and jobs in regional communities.
Fonterra will invest more than $30 million into a state-of-the art milk processing plant at its Cobden site in South West Victoria, which will create 30 new jobs.
Woolworths managing director of supermarkets, Tjeerd Jegen, said the new contract meant Fonterra could invest more.
“Changes like integrated seals for milk containers and new, state-of-the-art processing equipment would not be possible without the investment brought about by this certainty,” he said.
Buying locally will also mean milk won’t be shipped long distances which only added cost.
Fonterra Australia managing director Judith Swales said the contract expanded the co-operative’s current white milk portfolio complementing their Riverina Fresh milk business in New South Wales.
“Australia is our second largest milk pool outside of NZ, so we take a long-term view and aim to deliver profitability, growth and sustainability in the Australian dairy industry,” she said.
The contractual arrangements are being finalised by the parties.
The modernised facility at the Cobden site will be commissioned in early 2015.
