Source: The West Australian

Story By: Rachel Donkin

Harvey Fresh has signed a three-year deal to supply private label milk to Wesfarmers-owned Coles supermarkets in WA in a major coup for the privately owned dairy processor.

The deal, as flagged in WestBusiness today, was confirmed by Coles this morning. It comes as Coles merchandise director John Durkan prepares to speak at the WA Farmers Federation's annual dairy industry conference in Busselton.

Harvey Fresh won the contract from rival Brownes, and will begin supplying Coles brand milk in WA from October 2011.

It has also agreed to increase the farm gate price paid to its 26 former Challenge Dairy suppliers to the standard price for all of its suppliers under the deal.

The win for Harvey Fresh would be a blow to Brownes, coming just months after New Zealand farming co-operative Fonterra sold the business to private equity firm Archer Capital.

The sale was delayed by Coles' decision to slash the price of its own-brand milk to $1 a litre, which is understood to have triggered an exit clause and allowed Archer to negotiate a discounted price for the business.

Brownes is understood to have held the Coles contract for 10 years.

The contract represents a major expansion of Harvey Fresh's existing milk business.

Brownes processes about 40 per cent - roughly 130 million litres a year - of the State's milk production, but it is expected to retain its title as WA's biggest processor by diverting production to lower - margin products such as cheese.

But the change in the private label contract will elevate Harvey Fresh to the biggest supplier of fresh milk to WA consumers.

To read the full story, follow this link: au.news.yahoo.com/thewest/business/a/-/wa/9928487/harvey-fresh-set-to-snatch-coles-milk-contract/