Sainsbury’s has signed a deal with milk processor Arla to supply a planned expansion of 70 new stores.

The retailer, which sells over 470m litres of fresh milk and 18m litres of fresh cream each year, plans to grow its total store space by 15% by March 2011

Arla, which previously only supplied Sainsbury’s own-brand fresh cream and butter, will now distribute to around 70 stores, mainly in the eastern region. Existing milk suppliers, Dairy Crest, Robert Wiseman Dairies and Graham’s Dairies will will continue to supply the rest of the retailers’ stores,

Some of Arla’s members will also join the Sainsbury’s Dairy Development Group, its 325-strong dedicated supply group launched in 2008,

Sainsbury’s business director for fresh & frozen foods, Simon Twigger, said the new structure would provide Sainsbury’s with a long-term sustainable milk supply. “This is a strategic decision, which we believe will help build our supply chain for the future growth of the company and enable us to meet our customers’ needs more efficiently.

“At the heart of this re-structure was the drive to ensure farmers get the best possible deal, while at the same time ensuring that we can continue to offer customers a competitive price.

Jonathan Ovens, chairman of Arla Foods Milk Partnership, the group of dairy farmers who supply milk to Arla Foods, said: “I’m delighted that AFMP members will be supplying milk to Sainsbury’s and will become part of the successful SDDG. I look forward to developing our relationship with Sainsbury’s going forward.”

When the new structure comes into effect in October, up to 25 new farmers will join Sainsbury’s direct supply group, which currently consists of 325 dairy farmers in six milk fields in Great Britain, and a further nine dairy farmers and an additional milk field in Northern Ireland, which joined the group last autumn. In addition, as part of the deal, Dairy Crest’s SDDG farmers will each receive an additional premium of 0.5p per litre, bringing them in line with the rest of the SDDG.

William Goodwin, SDDG Dairy Crest farmer, said: “I am really pleased that Sainsbury’s continuing growth has resulted in the opportunity for more dairy farmers to benefit from the Sainsbury’s Dairy Development Group. This mutual success is reward for the hard work and commitment by all those involved with the SDDG and bodes well for the future.

“The SDDG has undoubtedly made my farm more profitable, and if more farmers are joining the group, it can only be a good thing for the dairy industry.”