We know that the original body was just like any other small voluntary association. Its day to day business was handled by a Council of volunteers; there were no staff and communication between the association and its members was by word of mouth and regular general meetings.
We also know it operated in a very different social and business environment. This was a time of large families with Mum working full time in the home and Dad the sole bread winner. In the business world, there was very little regulation and little control of food safety.
At a time when milk was regarded as an essential part of every family’s diet and refrigeration in the home was a dream, a regular supply of fresh milk was considered to be a vital service. In Sydney, Milk Vendors (known as Milkos) delivered milk twice a day to virtually every home. The first delivery always commenced in the early hours of the morning so that every customer had fresh milk for breakfast. The second started in time to ensure every customer had fresh milk for their evening meal. This routine continued for seven days a week for every day of the year – including Christmas.
The milk supply came from two sources. “Cold” milk was produced on farms in the Camden, Illawarra or Hunter regions, refrigerated and shipped in specially insulated rail wagons to Sydney where it was generally pasteurised before sale. “Warm” milk was produced at intensive farms within the Sydney region for immediate sale in the local area. Some of these farms were located as close to the CBD as South Sydney and Dover Heights.
There were no bottles or cartons – all milk was transported in vats in special milk carts each pulled by a well trained horse. It was then measured by the vendor into a billy can which the customer had left on their front step.
In a wildly competitive market, there were usually several vendors delivering in the same street and shady tactics were common. It was not unknown for a new Milko, trying to establish his business, to go around a competitor’s run putting lemon juice into the billy cans so that the milk was sour when the customer tried to use it. Later that day he would canvas the householders claiming that his milk was the freshest.
In such an environment, having secured the customer, it was essential to do everything possible to keep them. To this end, price cutting was endemic. To compete, many Milkos felt compelled to water down their milk and/or give short measure.
Considering all these circumstances, it is remarkable that groups of these ultra-competitive milk vendors actually got together to try to create a better industry. One of the first moves was a “launch picnic” of vendors on Sydney Harbour. This was deemed to be a suitably relaxed and neutral location for peace talks. Following the success of this, further meetings were held to discuss ways of bringing stability to the industry.
On one such meeting, a game of two-up was introduced by a vendor named Joe Thomas. He later sold his milk run to concentrate on running the highly illegal but very successful “Thommo’s Two-up School” which continued as a Sydney institution under various owners (and despite many half hearted attempts by authorities to close it down) until the late 1980’s.
Whether the diversion of two-up actually helped or hindered the more serious business is not clear. We do know that a few more meetings were held before the decision was made to join in common cause. The AMVA was born.
The new association had at least two objectives. One was to put increased pressure on their suppliers – the city farmers or the milk companies who brought the milk from further out. The second was to try to clean up the industry and eliminate at least some of the malpractices.
One of their first acts was to produce a leaflet accusing the Hawkesbury Dairy & Ice Society Limited of selling a concoction of milk, skim milk and water as fresh milk. The leaflet urged consumers to only buy from a member of the AMVA as all AMVA members were required to act ethically and any member “convicted at any time for any offence appertaining to Public Health will be expelled”. The Hawkesbury company was later fined for several offences.
Although the efforts of the AMVA may have succeeded in reducing some of the malpractices, the records show that public disquiet gradually increased. In the late 1920’s, the New South Wales Parliament felt compelled to act.
In 1929 the Milk Board was created to bring some order to the scene. At first, it set standards and started to license the milk processing companies but did little to calm the distribution sector.
As the Board grew, it began to become more forceful in its approach. It issued licences to vendors and employed an army of inspectors to police the health regulations and to check that milk had not been watered down or short measure given. It was not uncommon to find an inspector following shortly behind a vendor, surreptitiously checking the contents of each billy to see whether the vendor had given short weight.
In 1925, the first milk bottling plant had been established. The public gradually warmed to this cleaner, more secure product and sales slowly increased. As bottle sales grew, the ability to defraud the customer was substantially reduced. As a result, many of the old rogues sold their runs and some semblance of propriety began to appear.
In 1942, with the Second World War in progress and Australia under direct threat from Japanese forces, the need for military manpower was desperate. It was realised that one man could handle a lot more homes if he served every customer in the street instead of having half a dozen Milkos each serving a few in each street. So, every milk run was “zoned” into a compact area with only the chosen milko allowed to serve the customers in his zone. At about the same time, price control was introduced in order to prevent profiteering.
This system was so successful in freeing up men for the armed services that it was also adopted by bakers who also home delivered bread each day.
In the late 1940’s, with peace (and the soldiers) returned, the Milk Board decided to end zoning. Milkos argued strongly against any change on the grounds that it would inevitably lead to inefficiencies and higher prices.
For the next few years, the AMVA led the fight to keep zoning and the Milk Board did everything it could to break it down. Eventually, the Board realised it wasn’t worth the fight and decided to take over the administration of zoning. The AMVA was very happy to agree to hand over the increasingly onerous task – so everyone was happy.
During this time, the AMVA membership had increased and its stature within the industry had grown accordingly. With greater recognition and increasing involvement in the running of the industry came an increasing workload which became too much for the volunteers who were still handling all of the association’s affairs.
His successor displayed equal gusto. Over the next few years, the AMVA became involved in a series of expansionary initiatives. The first was to clean up the rackets surrounding milk run sales.
Although the need to deliver to every home twice a day had disappeared during the war years, a milko’s life was still very demanding. Working seven days a week in all weathers, with no provision for days off or sick leave was a way to make a better than average living but it could very quickly pall. The average vendor sold out after three years and looked for a less demanding career.
This rapid turnover was a magnet for a few unscrupulous business agents. With no stake in the dairy industry and no concerns other than getting maximum commission, they told any story needed in order to make a sale at an inflated price. The resultant problem of trying to help people who had paid too much for their business or were physically incapable of the heavy work involved fell to the AMVA.
In desperation, the association set up as business agents in their own right. With the enthusiastic support of the rest of the industry (who were equally appalled at the behaviour of the shonks) the AMVA agency soon began to dominate and a steady flow of commissions paid for the extra staff needed and allowed the association to offer extra services to its members.
In a similar vein, there were also problems with the way many new vendors were signed to expensive loans to buy their business. Emboldened by their success in neutralising most of the shonks, the AMVA formed a finance company to offer loans to new members at discounted rates. To get the funds needed, the new company offered competitive rates for fixed deposits from existing members and, particularly, vendors who had just sold their business. Again, by operating on a shoestring and sticking to the industry it knew, AMVA was able to solve a problem and make a profit.
For the next twenty years, the industry changed very slowly. Governance remained with the NSW Milk Board which changed its name a few times before becoming the NSW Dairy Corporation, but its tight control of all aspects continued. Following a bitter campaign led by the AMVA, the requirement for seven day delivery was relaxed to an optional six day week. The permissible hours of delivery were amended to allow for either morning or afternoon delivery to homes. Motor vehicles replaced the horse and cart. The standards for vehicles increased to provide better protection for the product.
The number of product lines carried increased. The old Milko carried just two lines – milk and cream. In the sixties this was expanded to include two types of milk – pasteurised and homogenised. Then buttermilk became available, followed by yogurt. Over the years, the list has expanded to dozens. Today, if the customer wants it, we carry it.
In the late forties, another crisis arose. New South Wales was hit by winter milk shortages. Traditionally, farmers prefer to produce milk on a seasonal basis. Cows come into production in spring, milk well during summer, then “dry off” in autumn. After a few months out of production, they produce another calf and the milk production cycle starts again. This is the most economic way to produce milk, but it is a potential problem if you need to satisfy customers wanting fresh milk every day of the year.
In Victoria, where farmers produce over 60% of Australian’s annual milk production, this production slump is not a problem. Only a small proportion of their production is used as fresh milk, the rest is exported or turned into dairy products.
In New South Wales where farmers only produced about 10-20% extra, it left no room for error. The post war baby boom and an influx of migrants from Europe, saw milk consumption soar but winter milk production did not. Faced with insufficient supplies to service the market, the authorities acted. Milk rationing was introduced and became a dreaded feature of each winter.
This was a disaster for milk vendors. At the height of the shortages they received only half their requirements. Working out how to fairly distribute this was a challenge. Obviously, you want to help families with children, but this means other customers get even less. For any businessman seeking to maintain a good relationship with his customers, it was a major challenge. Even worse, when rationing ended, some customers discovered they had adapted to using less milk and liked the idea of saving money. Each year of rationing saw a subsequent reduction in consumption.
Eventually, a system of farmer quotas was devised. Each New South Wales farmer was given an individual weekly quota which set out the volume of milk the Milk Board would purchase at a premium for sale as fresh milk. The farmer had to produce this quota every week of the year. If a farmer failed to meet his quota and could not show exceptional circumstances, his quota would be reduced to the lowest production figure for the year. With quota milk being bought at a substantial premium, this was a big incentive to maintain year round production.
The system worked and winter milk rationing disappeared overnight. The problem was solved but a time-bomb had been created which would explode thirty years later.
This state of affairs did not please the big supermarket chains. They rather liked the idea of being able to bargain with their suppliers. They definitely did not like the idea of having the Dairy Corporation telling them who would deliver their milk supplies, how much they would pay and the price at which they could sell it.
The major chains had strong allies in the Victorian Dairy Industry. Unlike their New South Wales counterparts, the Victorian market was largely deregulated. Victorian farmers were annoyed because the NSW fresh milk industry was closed to them. Because they lacked NSW milk quotas (and certainly didn’t want to buy them) they were unable to take advantage of the higher prices. They were encouraged by the Victorian milk processors who believed the NSW milk processors were using the market milk premium to subsidise their production of other dairy products.
There were a long series of skirmishes with various solutions being cobbled together to largely maintain the NSW system. The problem the NSW negotiators faced was the unanswerable challenge of the Australian Constitution which states that trade between the States shall be free. Still, by various legislative and commercial means the situation largely held.
In 1983 a meeting of supermarket leaders with the Dairy Corporation resulted in a list of demands which were largely impossible to meet within the system. However, there was one which could be met by the milk vendors – although it meant giving up some of their cherished independence. After a series of fiery meetings, vendors agreed that, instead of each vendor billing his supermarkets personally, a body would be created to receive daily sales figures from vendors, collate this into individual store invoices and convey these invoices together with a total chain account to each chain by each Monday morning, 52 weeks a year. As part of the deal, the chains were then to pay the account by the following Wednesday and these funds were to be disbursed back to the vendors on Thursday in time for vendors to pay their processor.
Even today, that sounds like a tight schedule. The main constraint was technical. In 1983, computers were still uncommon. Many vendors had never even touched one and very few had even minimal proficiency in using them. But, there was no way the time line could be met without them. But, if the scheme was to go ahead, there was no option. The NSW Dairy Industry was built on a weekly cycle. Vendors billed their customers weekly and paid their processor weekly. Although supermarkets were renown slow payers, they had no option with their NSW milk accounts. Under the existing zoning system, any vendor who experienced problems getting their money on time from any customer could complain to the Dairy Corporation who would warn the offender that supplies would cease unless their bills were paid on time.
To add to the difficulty, all of this was occurring against a background of conflict within the AMVA. After an unprecedented period of prosperity, conflict within the Association had resulted in a new Secretary being appointed. Increasingly, vendors were questioning the AMVA’s role. Membership levels decreased.
It was eventually agreed by all that a company be formed to administer the new operation and that it would be separate from the AMVA but the AMVA would actually do the day-to-day work on a contract basis.
The independent company, known as Milkbilco Pty Ltd, was duly formed and started to develop a system which utilised small home computers at each depot and an external computer service to receive and collate the data. It was decided to limit the launch of the system to the Sydney metropolitan area and to one chain, Woolworths.
The launch was disastrous. There were problems with the external server and vendor training proved to be inadequate. Many simply couldn’t successfully operate the depot computers. All AMVA staff were diverted to inputting the data and forwarding it to the external server. Despite the problems, the system managed to produce the invoices on time, Woolworths were as good as their word, the funds were deposited on time and vendors received their money on time.
After a couple of weeks, it was agreed that most of the data entry would have to be handled by casual staff working from the AMVA office. A few months later, the server was also brought in house. Eventually the system developed to include every store of every supermarket chain in NSW. Vendors learnt to use computers and the system became totally automated. At its peak in 1998, before the distribution sector was deregulated it was turning over $5 million a week. Best of all, vendors loved it because it reduced their workload and the supermarkets chains were enthusiastic at the quality of its output and the fact they had one central place to take their problems and concerns.
But, that didn’t stop the supermarkets wanting deregulation.
The time-bomb had exploded in April 1984 just after Milkbilco commenced its operations. A minor Sydney based chain entered into an agreement with a minor Victorian processor based at Shepparton to bring two litre plastic containers into the Sydney market. Although the amount of milk involved was small, the potential repercussions were enormous. Faced with a rival selling milk below their buying price, the major chains said they had no option but to do likewise. If they did, rapid deregulation would inevitably follow.
Official reaction was swift. Without consulting vendors, the Dairy Corporation slashed vendor margins to placate the chains. Vendors were outraged. Those serving supermarkets knew they faced an immediate financial crisis. Those serving small stores and homes knew their sales would plummet in the face of price competition they could not meet.
This was the era in which the vast majority of new vendors were mortgaged to the hilt. Generally, new vendors saw a milk run as a safe way to get into business. A milk run was seen as a business virtually guaranteed by Government. The profit margins weren’t great but there was security and hard work ensured the growth of an asset which, when the loans were all paid down, could be sold to realise funds to be put into a less demanding business.
All of this was in danger of crashing down and with it they faced the loss of the homes they had mortgaged to buy into the industry. It is hardly surprising they were upset.
With the AMVA still in turmoil, a vendor meeting was arranged at Penrith to plan a response. It was standing room only with a sizable overflow unable to even get in the door. After considering a range of alternatives, it was agreed that the best chance of success lay in utilising the AMVA and its resources.
The AMVA then called a meeting at Concord which was attended by even more vendors. After more fiery debate it was decided to re-assemble with their delivery vehicles at Driver Avenue outside the Sydney Cricket Ground – this being a wide street with virtually no traffic but very close to the CBD – a perfect spot to assemble large numbers of vehicles. About four hundred trucks turned up – many carrying several vendors. The assembled trucks then drove in convoy to Parliament House where they proceeded to block off Macquarie Street.
A very noisy demonstration followed which got lots of predicable support from the Opposition and Independents but only a short appearance by the Minister for Agriculture who was roundly booed back into the House.
The next day, an even larger contingent again descended on Macquarie Street. This time we got results with the Premier, Neville Wran, agreeing to meet a deputation. It is fair to say he was very sympathetic and promised to do what he could to help.
Over the next few months, with the Premier’s help, the support of the Dairy Industry Conference and a lot of work by members, we succeeded in stabilising the industry. But, the problem had not gone away.
Despite this enthusiasm and the vastly increased numbers, there were still major organisational problems. The old AMVA had become heavily reliant on the commission its business agency received from the sale of milk runs. That had now disappeared. With milk runs worthless and no one wanting to enter the industry, the AMVA’s carefully garnered reserves were quickly being depleted. Worse, the crisis and the problems with the initial system meant that Milkbilco was stalled with only a fraction of its planned stores but massive overruns in expenditure.
The newly elected State Council and senior staff knew their top priority had to be rebuilding the distribution sector – there was no point in re-creating a viable AMVA if there were no vendors left. But, without a viable AMVA it would be difficult to do the work needed to achieve their prime objective.
With some luck, support from some people in other sectors of the industry, a lot of hard work and by making the difficult decisions, both objectives were eventually met.
Recognising that milk vendors by themselves had little political clout, one of the first objectives was to harness the goodwill of those who did, namely our household customers and other sectors of the dairy industry such as farmers.
Getting support from industry was quite straightforward. All sectors of industry were represented on the Dairy Industry Conference, a body created by legislation to advise the Minister for Agriculture on Dairy Industry matters. Some of the members of the Conference were already well aware of the importance of vendors to the system. For the rest, it was a matter of clearly and consistently outlining the likely outcome for them and the entire regulated system if vendors were allowed to disappear. In this we received vital support from several key leaders of the other sectors who had long recognised the importance of the distribution sector.
Getting support from householders and smaller shopkeepers was more difficult and, it must be said, a lot more fun. The two most memorable schemes were a petition and a telegram campaign. For the first, a leaflet was delivered to every home delivery customer seeking their support for a petition to the Premier asking him to do whatever was necessary to ensure the regulated system survived. The result was a petition which we believe was the largest ever received by our State Parliament. It was delivered to the Premier by another giant convoy of trucks – except that this time we took great care not to block Macquarie Street.
The telegram scheme was a stroke of genius devised by a member from Dubbo and adopted wholeheartedly by vendors throughout the state. In the days before email and fax, he reasoned that the most effective way to contact an MP was to send an urgent telegram. He also knew that many people would agree to send one but might forget or baulk at the cost. To overcome this, he devised a simple approach. The vendor would talk to the shopkeeper and point out the danger facing them if the regulated system broke down. When the shopkeeper agreed to send telegrams to the Premier and the Minister for Agriculture, the vendor would then offer to send them for him. He would then pick up the shopkeeper’s phone and send the telegrams.
The result was spectacular. We were told the telegram system was overwhelmed by the surge in demand, extra staff were called in and “truckloads” of telegrams were delivered. Unfortunately, there was no way we could confirm these stories. All our efforts to find out were met with a stony official silence. However, we can confirm that a new willingness to listen and to respect our views was apparent within the bureaucracy and Parliament House.
With the Dairy Industry Conference largely supportive and the politicians prepared to listen, the real work of devising a new distribution system could commence.
With the wholehearted support and financial assistance from all sectors of the industry and the full co-operation and support of the Dairy Corporation, every aspect of our members’ operations was examined and improved. This resulted in rationalisation of many businesses and the closure of many distribution depots – often at considerable cost to individual vendors. Standards were improved and enforced. Our aim was to create world’s best practise within a regulated system.
It worked. The ultimate accolade was delivered by a senior executive of a major American corporation who had been contracted by the Dairy Farmers Co-operative to re-design their logistics and sales systems. High on his list of recommendations was, “Whatever you do, do not lose your vendor system”.
An essential industry priority was the concept that NSW consumers should not be disadvantaged. The price of milk from Victoria became our benchmark. If we could compete against milk from Victoria, while delivering a more effective delivery system, we believed we were meeting that priority. With a couple of exceptions for extraordinary circumstances, that objective was met.
With time, even Milkbilco blossomed. It was processing every store of every major supermarket chain in the state. At its peak it handled accounts worth over $5 million every week. Each Saturday, each vendor pressed a key on his or her computer and their data was transmitted to the AMVA computer which processed and collated it ready for transmission as a series of accounts to each chain. Every Friday, every vendor received the proceeds into their bank account.
Although the vendor still paid a fee for the service, most were actually saving money. The system had become so efficient we were able to arrange for vendors to nominate their processor’s bank account for their payment which was automatically credited against their account. This saved the vendor from paying bank charges and the taxes then applying on deposits and cheques.
Despite all this effort there were still external factors making life hard. Victorian farmers still wanted access to the NSW market and the supermarket chains wanted to be able to control their supply chain. The combined efforts of the entire NSW dairy industry, could not change those views.
Thus, there were more attempts make to break the NSW system. Each was countered but with increasing difficulty.
Part of our defence was an arrangement known as the Kerin Plan. Designed to give Victorian farmers some of the benefits of trade within NSW, its effective result was the transfer of funds from regulated states such as NSW to deregulated ones such as Victoria. The legislation establishing the plan was due to expire on 1 July 2000. Without it, our job would be much more difficult. Sooner or later an attempt would succeed.
The scheme envisaged legislation to deregulate the distribution and marketing sectors according to a five year program. During that time every vendor would get the opportunity to get out of the industry by selling their trade into a pool, Vendors who wanted to stay did not need to do anything although they had the opportunity to buy trade out of the pool. They could also take a chance by selling their existing business into the pool with the hope of buying a discounted run out of the pool. The cost of running the pool and the losses expected on the resale of runs was to be met by a fund financed by a deduction from farmer, processor and vendor margins.
After a great deal of debate, the vast majority of vendors at every meeting endorsed the plan.
It was perhaps predictable that the implementation of the plan was even more difficult than securing agreement from government, each dairy industry sector and our major customers. We always knew we would have to work with very limited funds – by careful planning that should have been manageable. The real difficulty was the rigid framework mandated by the enabling legislation.
As required by the legislation, a company know as Milk Distribution Services Pty Ltd (MDS) was created. The Chairman was Jim Forsyth representing the Dairy Industry Conference. Other Directors included Kevin Moore representing milk processors and Winston Watts representing farmers. The AMVA was represented by its Executive Officer. Before the company could complete its work Kevin Moore had to retire due to ill health and his place was taken by Calvin Boyle. Over the years, the AMVA has received support from quite a few people who were not milk vendors. None contributed more or did more to help vendors than the Industry representatives on MDS. None of them stood to gain in any way from the company. Their sole motivation was to get the job done in the best possible way for the benefit of existing vendors.
After interminable delays getting the company up and running and securing legal advice on what could or couldn’t be done, the Directors looked for the best way to actually conduct the program. With the AMVA’s preferred options debarred by the legislation, it was decided to divide the State into areas and to make offers to the vendors in each area in turn. After looking at various implementation plans, John Thackeray and partners were appointed to implement the scheme.
With legal constraints imposing a very legalistic and inflexible approach, it was inevitable that many vendors were not happy with aspects of the MDS operation. Tensions were increased by the fact that the offers forced vendors into confronting the difficult choice of whether to stay or go. Inevitably, many who decided to sell felt their offer was too low.
The end result was not as good as many had hoped but infinitely better than the alternative. Every vendor had the opportunity to leave the industry before the deregulation date and many runs were rationalised. The vendors who remained were generally better positioned to work in a deregulated market.
As scheduled the distribution and marketing sectors of the NSW Dairy Industry were deregulated on 30 June 1998. On 30 June 2000, the rest of the industry followed. What happened after that is history that is still being written.