DAIRY CREST has won a 30,000t cheese contract with supermarket Asda that will safeguard its Aspatria creamery and boost north-west dairy farmers. But the move is also raising price cut fears within the industry.
The processor provides about half of Asda’s own-label Cheddar and other hard cheeses, but under the new deal will supply the vast majority. Farmer-owned co-op Milk Link, Asda’s other major supplier, will be the biggest loser.
Most of the cheese will come from Dairy Crest’s Aspatria plant in Cumbria. Arthur Reeves, milk purchasing director, said: “If we had lost this contract the plant’s future would have been in massive doubt.”
About 30% of Aspatria’s milk comes from 88 members of farmer supply group Dairy Crest Direct, with the rest from co-ops Dairy Farmers of Britain and First Milk.
Mr Reeves said recruiting more Dairy Crest Direct members to supply some of the extra 135m litres required was a possibility, but there would also be discussions with DFB and First Milk.
Allan Lowrey, regional director of Dairy Crest Direct, said the move was good news for the region’s farmers because it would allow them to plan.
But there are worries that awarding such a large single contract will have the same knock-on effect as Asda’s decision last year to source all of its liquid milk from Arla Foods UK.
That resulted in a massive shuffle of supermarket business as contract losers scrambled to find new homes for their milk. As a result, prices came under pressure and farmers lost out.
But Mr Reeves said Dairy Crest and Asda were keen to ensure that existing suppliers were not forced to offload stocks. “We have the most to lose if cheese prices come crashing down.”
For this reason, the open-ended contract has no official start date, but will be gradually phased in over the year, said Mr Reeves.
A spokesman for Milk Link said the loss accounted for just under 10% of its cheese production and would have an impact on the business, but added: “The majority of it is low-margin Smart Price Cheddar, so from that point of view it isn’t as material as it might seem.”