Tesco is to offer dedicated milk supply contracts to about 850 producers and a base price of 22 pence per litre, in plans announced on Tuesday (3 April).

According to Tesco contracts will run for 12 months with the milk price reviewed every six months to ensure it reflects the true cost of production.  Tesco insists the price will consider price movements in key variables such as feed, fertiliser, energy and labour.

Tesco, which as the UK’s biggest grocery retailer sells more milk than any other retailer, has also announced plans to sell milk under a ‘local’ term in response to customer demand for more locally produced products.

The milk, which will be sold using the term ‘localchoice’, will be supplied from about 150 small family-owned farms around the UK and sourced through Dairy Farmers of Britain.  The milk will then be sold in Tesco stores throughout their county.

A premium of up to six pence per litre more than they currently receive will be paid to these producers.  According to a Tesco statement these producers will also be able to take part in the retailer’s local marketing initiatives.

The ‘localchoice’ milk will be offered to customers at a slightly higher price, enabling customers to choose to pay more if they wish to support small local producers.

It has also created a section on its farming website - www.tescofarming.com - which will be accessible to their dedicated dairy farmers to keep them up to date with the scheme. 

REACTION STORY: Tesco milk contracts get warm welcome from industry