12 January 1996

25.3p/litre offer is good and fair, says Dairy Crest chief

By Shelley Wright

DAIRY Crest is offering farmers 25.3p/litre, guaranteed for 12 months, to supply milk directly to its factories.

The company currently sources about 80% of its 1.5bn-litre annual milk requirement from Milk Marque, but now wants to secure more supplies direct from farms.

Chief executive John Houliston, talking exclusively to FARMERS WEEKLY, says that Dairy Crest is an attractive option for producers who want a long term partnership with a successful and growing business.

The headline price of 25.3p/litre, before haulage deductions, is based on a standard litre of 4.1% butterfat and 3.25% protein. Producers can opt for seasonal price adjustments or for a flat payment scheme throughout the year.

"We believe we are offering a good and fair price. It is probably mid-way in the range of prices paid around the country," said Mr Houliston. But the company has not set a target on the number of producers it wants to sign up.

"We have not set ourselves any ideological targets. At the moment 80% of our milk comes from Milk Marque and the other 20% from other milk groups. That balance will certainly change, but our factories each have different compositional requirements so in effect we will be sourcing milk on a local basis," Mr Houliston explained.

Dairy Crest will offer different compositional payments depending on which factory a producer supplies. "We would welcome all producers as long as they fall within a suitable geographic area to make collection economically sound. But what we really want is to develop tight milk fields around the factories," he added.

In the approach to market deregulation, Dairy Crest was governed by the Milk Marketing Board which refused to allow the firm to join its competitors in trying to source milk directly from farms.

Since vesting day Dairy Crest has concentrated on restructuring its business. Coupled with factory closures and staff cuts, the firm has also withdrawn from third-party milk haulage.

"That has all taken over a year but it is important to move forward consistently in achievable steps. Now we can continue with our aim of securing direct milk supplies," said Mr Houliston.

Mr Houliston believes that Dairy Crests half year results, (Business, Dec 15) clearly show that all the change has been worthwhile. "We now have a profitable, robust, and secure company, and I hope that producers will see us as a very attractive option."