DAIRY company Lion says being dumped as Woolworths' milk supplier in Victoria and Western Australia will affect volumes at its plants in those states.
Lion lost contracts to supply Woolworths' private label white milk to Victorian and West Australian stores, with the supermarket giant announcing a raft of new, longer contracts nationally.
New Zealand dairy company Fonterra won a 10-year contract to supply milk to Woolworths in Victoria from February 2015, while Brownes was chosen for a seven-and-a-half year deal in WA from this July.
Lion said it was disappointed, with the impact yet to be assessed.
"Woolworths' decision will impact volumes at Lion's milk processing plants in Chelsea (Victoria) and Bentley (WA)," the company said in a statement on Thursday.
"We will work through the detailed implications of this with our teams over the coming weeks."
Lion said it put forward its most competitive bid in each state and was pleased to retain contracts to supply Woolworths Ltd's private label white milk in South Australia, Tasmania and the Northern Territory.
"However, we fully respect that this is a decision for Woolworths, which remains an important customer and partner for Lion," the company said.
Woolworths hailed the new contracts a win for farmers and customers, saying longer-term contracts gave dairy farmers and milk processors confidence to invest in their businesses.
Arrangements were also made to keep milk in the state where it is produced, particularly in WA.
"We no longer want to see milk shipped across borders, which only adds cost and increases the time between the farm and the supermarket shelf," Woolworths managing director Tjeerd Jegen said.
Thirty new jobs will be created under the new deal between Victorian Woolworths stores and Fonterra.
Under the 10-year contract, Fonterra's processing facility in Cobden in rural Victoria will expand to meet the demand.
Premier Denis Napthine says the deal is a vote of confidence in the state.
In NSW, Woolworths signed a two-year contract with Parmalat for its milk, while the dairy company won a 10-year contract to supply Woolworths in Queensland.
The Queensland Dairyfarmers' Organisation said the move was positive as longer term contracts brought security to the local industry and it hoped the deal led to Parmalat paying stronger farm gate prices.
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