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Bega Cheese shares are tanking after it lost a key Coles deal

Triathlete Jamie Edwards before his training swim for the Challenge Shepparton. Michael Dodge/Getty Images for Challenge

Bega Cheese shares dropped sharply after the dairy lost a deal to supply plain packaging cheese to Coles.

A short time ago, the shares were at $6.24, down more than 11%.

Coles Supermarkets told Bega it intends to change suppliers for its “own brand” cheese manufacturing and packaging when the current five-year agreement expires in January 2017.

Bega says will it redirect milk supply to other value added dairy products and markets including infant formula. Tatura, a subsidiary of Bega Cheese, has launched a new infant formula in partnership with vitamins maker Blackmores.

“The focus on higher value product mix and markets is consistent with the strategy of the business,” says Barry Irvin, executive chairman at Bega Cheese.

The new supplier to Coles is dairy co-operative Devondale Murray Goulburn.

The five-year agreement from 2017 comes after Coles began a 10-year deal with Devondale to produce Coles Brand milk for Victoria and NSW in 2014.

“We look forward to continuing our good relationship with Bega Cheese and remain committed to stocking branded products produced by Bega Cheese,” said a to a Coles spokesperson. “This year we will continue to source Coles Brand cheese from Bega Cheese and stock around 20 Bega branded products in our supermarkets.”

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