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MEDIA RELEASE: Harvey Fresh rewards suppliers with New Milk Payment contracts

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PO BOX 223, THIRD STREET, HARVEY, WESTERN AUSTRALIA 6220

TEL 61-8-9729 0600  FAX 61-8-9729 2298

WEB: www.harveyfresh.com.au

EMAIL: info@harveyfresh.com.au

 

MEDIA RELEASE

18 June 2014

 

HARVEY FRESH REWARDS SUPPLIERS WITH NEW MILK PAYMENTS CONTRACTS

Harvey Fresh is pleased to announce the launch of new supplier contracts that increase farmgate milk price payments to its dairy suppliers; simplify the pricing schedule; and launch an incentive scheme to encourage additional summer milk production through significant price bonuses.

"Harvey Fresh is a great domestic and export business with a dedicated group of farmer suppliers," said Harvey Fresh General Manager Paul Lorimer.

"We see our supplier base as a critical pillar to the future growth of the company and a strong relationship is key for success. The new, improved supply contracts seek to build on that relationship by making our farmers more profitable and our milk supply more sustainable.

"This is a significant move and will represent an additional investment in the WA dairy industry in excess of $7 million over the life of the contract."

Some of the key elements to the contracts include:

* Contract to run until December 2017

* Increase in farmgate milk pricing (average 2c/litre benefit)

* Generous multi year new milk incentive that depending on individual uptake could deliver a further 1.5 to 2.5c/litre across all litres in 2015 and future years

* Re-alignment of quality standards with national benchmarks enabling more farmers to acheive Grade 1 status

* Simplified protein and butterfat schedule

* Standardised pricing for all suppliers, including standardised volume and proximity bonuses. No volume or proximity penalties

* Continued minimum price guarantee for the life of the supply contract

Mr Lorimer said the package of changes boosted farmgate returns for Harvey Fresh suppliers while simplifying the pricing structure.

The New Milk Incentive is designed to provide financial motivation to increase summer milk production. It will reward farmers with a bonus above the scheduled priced for every additional litre of milk produced in the January-May period. The magnitude of this milk incentive is unprecendented in WA.

Previously, growth litres from one year were counted as base litres the following year. The new Harvey Fresh New Milk Incentive enables the volume growth for the future three years to be measured against the 2014 volume base, providing even greater returns over the life of the contract.

"The summer price incentive seeks to provide financial encouragement to our farmer suppliers to invest in herd management changes, irrigation or supplementary feed to increase milk production overall," Mr Lorimer said.

"Importantly the base rate will be used for the term of the contract, so growth litres will attract the incentive premium from 2015-2017."

"Initial feedback from our farmers has been incredibly positive"

Mr Lorimer said the ability to increase supply through summer would aid Harvey Fresh's export ambitions.

"We expect Harvey Fresh to win new export supply contracts that were previously out of reach due to our inability to consistently meet demand throughout the year," he said."

The simplification of the pricing structure is designed to reflect the composition of the WA milk market.

"Western Australia is a drinking milk market, and therefore, the new pricing structure will complement this market dynamic," Mr Lorimer said.

"We want to focus on growing our total milk volume, and the feedback we have received indicates the price incentives, along with the price transparency and standardisation, will foster that volume growth."

"It was almost critical that we provided contract certainty for the future for our farmers."

Mr Lorimer said the continuation of Harvey Fresh's minimum price guarantee was important to farmers.

"The ability to make management decisions and access capital knowing you can rely on a minimum price is a real advantage for Harvey Fresh suppliers. This provides much needed assurance and certainty for our suppliers," he said.

"We are pleased to be able to bring certainty to the West Australian market and build upon the investment that we have made," Parmalat CEO Craig Garvan said. "Our first priority was to ensure farmer stability and deliver an incentive for growth."

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MEDIA CONTACT:

Cameron Morse

FTI Consulting

Phone: +61 8 9485 8888

Mobile: +61 (0)433 886 871


 

About Harvey Fresh

Harvey fresh is a large domestic and export dairy and fruit juice business based at Harvey in South-West Western Australia. It is owned by Parmalat Australia, which has operated on the east coast of Australia for 70 years.

In addition to its dairy farmer and fruit and vegetable suppliers, the company employs almost 300 staff at its dairy and juice operations in Harvey, WA and Griffith, NSW.

It has more than 300 product lines and sells to retailers throughout Western Australia and Singapore, Hong Kong, Korea, China, India, Thailand and the Phillipines.

Harvey Fresh products include Harvey Fresh branded fresh milk, orange juice, long life milk, yoghurt, custard, cream and cheese plus Extra flavoured milk and Capel Valley cheese.

Harvey Fresh is the only major processor in Western Australia that buys and crushes oranges, apples, pears and carrots supplied from Western Australian fruit and vegetable growers.