Milk co-op Dairy Farmers of Britain is optimistic that the £5m spent refurbishing its Llandyrnog cheese plant in Denbighshire will be recouped quickly and provide real benefits to its members.

Speaking at the formal opening by Welsh Assembly minister Elin Jones, the plant’s general manager, John Thomas, said the expenditure was necessary to ensure the long-term sustainability and prosperity of more than 2000 farmer members.

John ThomasPart of the upgrade included two new 250,000-litre silos to store weekend milk, rather than selling it at a discount. Other improvements could further boost profitability, he said.

“The improvements, including the installation of state-of-the-art equipment at every stage of cheese production and packaging, mean we now exceed the stringent quality, health, hygiene and safety specifications set by all the major supermarkets.” Indeed, that has not been easy in the past; the first Tesco inspection was abandoned after 48 examples of non-compliance were highlighted.

The plant modernisation was financed through a combination of capital deductions from suppliers’ payments and borrowed money. A £224,000 marketing and development grant from the Welsh Assembly also helped.

But, DFOB said the improvements meant the annual labour bill for the plant’s 160 employees had been cut by £1.5m, as fewer staff were needed to operate the streamlined system. It also introduced a new flat-rate £24,000 a year salary structure and slashed overtime payments by matching workers hours to seasonal milk intake.

Mr Thomas added: “Currently the plant processes 200m litres of milk a year into 20,000t of cheese, but it now has capacity to make 30,000t if extra milk becomes available.”

He expected turnover to exceed £70m in 2008, or £20m more than last year. The co-op had £34m worth of cheese maturing in stores and aimed to optimise sales of branded value-added products, including its Cadog range.

Charlie Whittingham, whose family has supplied milk to the creamery for 50 years, admitted that, at first, he had grumbled about the capital deduction from the price he was paid for milk from his 330 Jerseys.

“But I believe producers should be prepared invest in their own futures,” he said. “Co-ops need to develop quality brands and be strong enough to compete in the very tough dairy product market.”

DFOB bought the Llandyrnog plant in the Vale of Clwyd in 2004, as part of its £65m, seven factory buy-out of the ACC Group in 2004. At the time, all the cheese produced was sold to co-op retail stores. Now it trades with ASDA, Tesco, Sainsbury’s and Morrisons and exports to the US, Canada, Iberia and the Middle East.