19 May 2000

Dairy Crest says Unigate deal good for dairymen

By Robert Harris

DAIRY Crests recent victory in the battle for Unigates dairy and cheese business is good news for milk producers, the firm claims.

The decision by Robert Wiseman Dairies to pull out of the fray last Friday ends three months of escalating counter-bidding and means Dairy Crest and Unigate will, subject to shareholder approval, join forces to create the UKs biggest dairy company, which will use more than 3bn litres of milk a year.

The £250m deal includes two UK cheese factories (Carmarthen and Haverfordwest), seven liquid milk plants, and the butter/milk powder factory at Chard, Somerset.

Although commodities will feature more in Dairy Crests activities, the merger will make funds available to develop more added-value brands, in line with previous policy, says chief executive, John Houliston.

"By underpinning Dairy Crests ability to finance the necessary investment to build brands with higher margins, it enables us to look to the future with greater confidence. That is good news for milk producers, too."

More than one in five litres produced on UK farms will go to Dairy Crest. Farmers in some areas are already benefiting, Mr Houliston says. "We pay more than the IMPE price in areas like Davidstow (the companys Cornwall-based cheese factory), which has added-value at its heart." Others will benefit as the strategy progresses, he adds. "Where the policy is delivering, we will pay."

The deal gives the company about 30% of the UK supermarket milk business, and it intends to remove some of the over-capacity which many in the industry believe has undercut prices.

Roger Metcalf of Agrifood Consultants questions whether Dairy Crests policy will lead to better ex-farm prices. "The poor old dairy farmer is at the bottom of the heap, and he is likely to stay there. The only way farmers can earn more is to set up processing units to add value to their own goods. Perhaps the current low prices will persuade more of them to do it."

Last month, the Dairy Crest Producers Association, representing 800 farmers from 10 groups, questioned the value of remaining tied to a company which had said it would pay no more for direct supplies than equivalent milk delivered from elsewhere (Business, Apr 28).

Spokesman David Haine says the group is considering its position.

"The company is performing very well – I just wish it was still farmer-owned. At least this merger will put Dairy Crest on a more equal footing with supermarkets, which I think have been forcing prices down. On the other hand, it also makes them more powerful on the farm side, too. Whether we will see any more money remains to be seen." &#42