Murray Goulburn (MG) has lost contracts to supply several private label products to Woolworths with Bega and several other suppliers besting the Victorian cooperative in a competitive tender.
MG will no longer supply lines of private label cheese, UHT milk, adult milk powder, and cream to the supermarket giant, however it retained the contract to supply private label mozzarella shred cheese as well as the contract to supply private label butter.
MG said the loss would cost it about $108 million, mostly falling next financial year.
The contracts to supply cheese lines for private label brands such as Select have been awarded to rival processor Bega Cheese, which lost its contract to supply private label milk to Coles to MG three years ago.
Woolworths has awarded the other contracts to a wide range of dairy companies, saying it wanted to align the contracts with producers in their home states.
Fonterra has been chosen to supply adult milk power, while Pactum won the UHT milk contract for all states except Western Australia, where it will be supplied by Harvey Fresh.
The private label cream contract was won by Bulla in all states except Victoria, where it will be supplied by Fonterra, and Queensland, where Parmalat will be the supplier.
It is believed MG, which mainly supplies the export market, will now be even more dependent on its contracts with Coles, as well as its existing sales of private label shredded mozzarella and private label butter for domestic revenues.
In a statement, interim chief executive officer David Mallinson said the co-op's lines of branded products would still be stocked in Woolworths.
"We believe our tender to retain this business was competitive, while balancing acceptable returns for our products given the current environment for our farmer/suppliers and investors," he said.
MG said it would adjust future manufacturing planning to redirect this capacity to other markets, limiting future revenue and earnings impacts.
In April, MG announced a surprise retrospective cut to farm gate milk prices, and downgraded its profit outlook.
