22 December 2000

Big supply co-ops set to merge into British Milk

By Robert Harris

TWO of the UKs major milk supply co-ops are planning to merge from next April.

Axis, based in the midlands, and Scottish Milk will join forces to create British Milk, the UKs largest dairy farmers co-op with 4500 members. It will trade 2.2bn litres of milk a year, almost a fifth of UK supply, producing a turnover of £400m.

Both boards have agreed to the move in principle, and members will vote next month.

"There is no doubt that Axis is the ideal partner," says John Duncan, chairman of Scottish Milk. "We have shared strategic objectives in promoting dairy farmers interests and we will provide customers with benefits of a national business."

It will also boost marketing strength. "Multiple retailers and processors are rationalising apace. As a national company we will be able to sit across the table on equal terms with our customers." The proposal also avoids regional competition concerns which could have been raised had a neighbouring co-op been chosen, he adds.

Axis chairman, Roger Evans, says: "Creating British Milk fulfils our key growth strategy and provides us with a national service capability." The move will also help reduce costs, notably in transport, and combined capital will help moves into processing.

Milk prices will be harmonised. But Mr Duncan stresses that Scottish Milk suppliers, who, according to our recent Milk Price Review, are paid 18.1p a standard litre compared with Axiss 16.6p, will not lose out.

Northern dairy co-op Zenith will be sandwiched between the new companys milk fields. But managing director Chris Bird says the merger is no big surprise, with most operators treating rationalisation as a priority.

He believes farmers will stick with Zenith, which is winning premium business from processors. "We have a very high level of loyalty. We have also started to take costs out to get more money back to our members."

Jim Walker, Scottish NFU president, described the news as a milestone. "UK dairy farmers were put at a competitive disadvantage by the Monopolies and Mergers Commission ruling on Milk Marque that forced the co-op to split. This signals the start of essential repair."

Jim Begg, director general of the Dairy Industry Federation which represents dairy processors, says: "This is clearly not an insignificant move. Relations between dairy companies and farmers are much closer than before. I hope this will continue." The main issue for processors is that milk continues to be sold on a competitive and market-linked basis, he adds.

Mr Duncan and Mr Evans will become chairman and vice-chairman, respectively, of British Milk. The first board – three Axis and three Scottish Milk farmer directors – will appoint executives. &#42