By Robert Harris
RECENT reports that Glanbia is to sell its liquid milk business to Express, a move which would signal the long-awaited start of major rationalisation in the milk processing sector, are being played down by both companies.
But some industry analysts suggest it is only a matter of time before an announcement is made.
For a predicted price tag of about £90 million, Express, which already has a 22% share of the liquid milk market, would gain a further 5%.
This would give it over a quarter of supermarket supplies and about 30% of the doorstep market. The move would leave Glanbia (formerly Avonmore Waterford) to consolidate its position as the UKs leading cheese-maker.
“There is a lot of speculation out there,” says Michael Patten, Glanbias group corporate affairs manager. “We have made no secret of the fact that there is huge over-capacity in the liquid milk sector.
“In our view, it is overdue for rationalisation. We have had discussions with Express both recently and in the past, but there are no agreements in place.”
An Express spokeswoman says the firm is “unable to comment on speculation”.
Analysts agree that six major players is too many, especially given recent moves by supermarkets to use just two or three suppliers apiece.
And with milk typically at 89p for four pints, this market has become the ultimate commodity, says one source.
Glanbias share of the liquid market is less than a quarter of Expresss share and well behind other leading players like MD Foods and Unigate, says another. “The move makes sense.”
United Milk Producers, formed earlier this year from five producer groups, is, at 200 million litres a year, a big supplier to Glanbia.
Although unwilling to comment on any specific deal, chairman, Richard Ashworth, is not surprised by the reports.
“This kind of rationalisation would not be unexpected,” he says. “But it would leave farmers in a weaker position.
The message it sends to us is that bringing together farmer-controlled businesses has to be the way to go.”