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Marchers carried placards saying "Keep local money local", "I love Wastebusters" and "Shame on you QLDC".
Many protesters were clad in orange and black, the Wastebusters colours.
The council's infrastructure and services committee awarded the annual contract for kerbside recycling collections and processing to Auckland-based Smart Environmental Ltd earlier this week. The price was $301,400 (plus $61,200 in the first year to pay for additional crates).
Two other tenders, including a $575,649 bid by present contractor Wanaka Wastebusters, were rejected.
Wastebusters manager Sue Coutts said: "They [the council] need to man up and admit the decision takes us in the wrong direction."
The protest was attended by Mayor Vanessa Van Uden, chief executive Debra Lawson and Wanaka Community Board chairman Lyal Cocks, but there was not enough time for them to respond to the speeches by Ms Coutts and Cinema Paradiso owner Calum MacLeod.
Cr Cocks was concerned the protest would delay the Kahu Youth Wanakafest parade through town.
He said afterwards he was "always keen to hear from the community, so it was good to hear the views of this group. The parade was great, so well done to Kahu Youth and, in particular, [youth worker] Richard Elvey for making it happen."
"We feel the process doesn't fit with community values. The council makes noises about being inclusive, cheering for the community, being sustainable and looking to the future, and they appear to have made their decision on a purely accounting basis.
"We have some concerns there should be values, other than just dollars, built into the process."
Mr Dickson criticised the council for comparing Smart Environmental's $301,400 tender to the $736,072 paid to Wanaka Wastebusters in 2010-11 instead of Wanaka Wastebusters' bid of $575,649.
"The only thing that should have been compared is the tender bids."
The community association queried how the new contractor could operate sustainably for such a low cost.
It felt the community should have been consulted about the recycling contract, given the high value placed on Wanaka Wastebusters' work, Mr Dickson said.
"In the past, when we set up the recycling centre, the community was strongly behind it, even though it did cost money.
"In the past, where we had the opportunity for community input, the cost wasn't the only criteria," Mr Dickson, a former Wanaka Community Board member said.