Murray Goulburn loses $108m deal with Woolworths

Australian dairy foods company Murray Goulburn (MG) has lost its contract with grocer Woolworths for the supply of cheese, UHT milk, adult milk powder and cream.

Woolworths has selected Bega Cheese to manufacture and pack these products under its private label.

However, Murray Goulburn will continue to supply butter and shredded mozzarella cheese under Woolworth's brands.

Annualised revenue loss is expected to be around $108m, though the dairy company states that the financial impact in the 2017 fiscal year will be limited due to the timing of completion of the existing contracts.

Murray Goulburn interim chief executive officer David Mallinson said: “MG continues to enjoy a strong ongoing relationship with Woolworths and they remain a valued partner for our co-operative.

“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.

“I can also reassure 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.”

MG intends to adjust future manufacturing planning to redirect this capacity to other markets, thereby limiting future revenue and earnings impacts.