Dairy Farmers of Britain says it has walked away from a 6000t cheese contract with The Co-op’s food retailing business.

DFB took on the contract when it bought The Co-op’s milk processing arm, Associated Co-operative Creameries, in autumn 2004.

But the three-year deal, which covers mainly own-label cheddar, is due to expire in a few months and was put up for tender.

A DFB spokesman said it had pulled out of the tendering process when it became apparent The Co-op was not prepared to pay enough for the cheese it wanted.

Instead, First Milk and Kerry Group will now each be supplying The Co-op with 3000t of cheese.

The DFB spokesman said increasing prices for commodities like skimmed milk powder meant there were more profitable homes for the business’s milk.

“This shows we’re not afraid of walking away from unprofitable contracts,” he said.

But First Milk vehemently denied that it had signed up to a bad deal for its 2800 members and said price was not the main reason it had won the contract. “We know there were lower offers on the table.”

Alison Tracey, head of trading for chilled and frozen foods at The Co-operative said: “We judged suppliers against a number of key criteria during our cheese review. The most important of these was the ability to deliver regionality, provenance and category insight. “First Milk’s ability to supply award-winning cheddar from five creameries across England, Scotland and Wales was a key factor in winning an increased share of our business.”

  • Both Dairy Farmers of Britain and First Milk have increased their July milk price. DFB added 0.25p/litre to its conventional and organic contracts, while Channel Islands’ milk will be worth an extra 0.5p/litre.

    First Milk’s 2800 members will be paid a further 0.5p/litre. “This is in anticipation of improved prices that our cheese business will receive in the next couple of months,” said chief executive Peter Humphreys.