Mao Zedong was credited with the saying: 'Shoot one, teach a million'. Scholars agree this quote originated from around the time of corruption settling within the political classes of the then burgeoning Chinese Communist Party in the 1950s.
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Mao's strategy for promoting change was swift and brutal (not much of Mao's China was pedestrian) as the message was received with ''examples" made.
As a farm kid from Kingaroy I usually steer clear of quoting Communist dictators, but we in Dairy are looking once again to the ACCC for leadership, precedence setting and perhaps, dare I say it, examples to be made to others.
Recently, Coles announced its intention to purchase two milk processing plants in southern NSW and Victoria owed by Canadian dairy giant Saputo (Cheer and Devondale) that bottle the Coles-own brand of milk.
These milk factories are capable of processing 225 million litres each.
So why does the ACCC need to be involved?
According to prescribed legislation, the ACCC must decide whether this deal substantially lessens competition within a market.
Coles holds 28 per cdent of the retail grocery market in Australia, and they know milk is a staple part of most supermarket visits.
Whether it is a big weekly shop or 'just grabbing a few things' on the way home, there is a reason fresh milk is always at the back of the building rather than in the refrigerated bays at the checkout with cold softdrinks.
If a supermarket can vertically integrate milk sales from farms they contract directly (which they do currently) onto factories they own to be sold on their shelves against competitor products they set the price on, it will be a great leap forward (Chairman Mao pun intended) into an entrenched anticompetitive duopoly grocery market.
If this sale is approved, it will reduce competition at the wholesale milk level, particularly when you know who provides Queensland Coles milk currently.
It will further strengthen the supermarket's bargaining position in negotiations with other processors as now their new direct competitor with the power of the price tag.
The incentive to drive down the supermarket's own brand of milk to distort the shelf price difference with private labelled products will be stark for executives eager to crow dominance.
Now is the time for sensible ACCC action ensuring an example is set amongst the retailers and a strong competitive field remains in place for farmers and consumers alike.
- Damien Tessman, dairy agribusiness manager
