Business Profile: Kate Allum, chief executive, First Milk

First Milk is the biggest farmer-owned dairy business in the UK. Gemma Mackenzie speaks to chief executive Kate Allum about her plans for the company, which recently appointed former farm minister Sir Jim Paice as its new chairman

Why should milk producers stay with or join First Milk?

Our sole focus as a farmer-owned business is to maximise the total return for our farmers. I think there’s a trust issue for farmers with a few other companies after their behaviour last summer prompted the SOS Dairy campaign. Farmers like the transparency we provide on areas like strategy, direction, election of board members and ultimately influence to set the milk price and returns on farmers’ investments. For British dairy farmers, this transparency and influence only exists with First Milk.

How many additional producers do you plan to recruit over the next five years and how?

I wouldn’t put a number on it but we are always looking to recruit additional producers in the right areas, with the right type of milk. We are really looking for milk producers who want to change the balance in the industry, want to invest in the supply chain and appreciate the value of working with other British dairy farmers. Our strategy is not about chasing volume for its own sake but about adding value and delivering a sustainable future for our farmers via a competitive milk price, an attractive investment return, and clear capital growth.

What are your plans for the company?

Businesses can follow two strategies – either commodity price leadership or differentiation. Our strategy is on the latter. We are focused on driving better returns for our farmers through delivering great tasting, nutritious food for consumers, both in the UK and abroad. Farmers can see this direction through our investments in CNP professional (sports nutrition company) and Lake District Dairy Co Quark. As an industry we have a great story to tell on dairy, we just need to get far better at talking about the positives of what we offer consumers.

What are the major threats to and opportunities for UK milk processors and how should the industry respond to them?

We all need to remember that consumers are still in a tough spot financially, and following the horrendous weather in 2012, so are many dairy farmers. Before we know it we will be into 2015 with the removal of milk quotas, which will surely involve a period of great volatility. Global demand for dairy products continues to grow year on year and we have some gilt-edged opportunities to supply these new consumers if we are prepared to create innovative foods, which meet the needs of the market and are produced in a sustainable manner.

What are the major threats to and opportunities for First Milk and how do you plan to respond to these?

Over-focusing on threats isn’t going to deliver the kind of business that our farmers want and deserve. The opportunities to promote the fantastic functional attributes of dairy, both in this market and overseas, are what we need to be spending our time on.

What did you change in the business after the SOS Dairy campaign?

It made us reflect on how we communicate with our farmer owners, not just about what we do in the business, but also about the governance. We did realise we could do a better job so we published our members’ charter, which clearly sets out how our structure and governance is focused solely on getting the best possible returns for our members. It also demonstrates how First Milk complies with the voluntary code of practice. Co-ops are dairy farmer owned and controlled businesses, where producers are not only suppliers but also owners and investors in the business. This means co-ops are treated differently to reflect their robust governance structures and because proposals for change can follow a transparent route to become company policy. The private and public limited dairy companies do not have these structures hence why there were required to have a shorter notice period.

What makes First Milk different from other dairy processors?

First, our strategy to focus on added value and differentiation in contrast to commodity products makes us stand out from most of the large companies in Britain. Second, the transparency of our business for farmers allows them to influence key areas such as strategy, appointment of board members and returns to producers. While the SOS Dairy campaign prompted other companies to look at the way they were treating farmers, none of the other major players gives farmers this level of influence.

First Milk in a minute

  • UK farmer-owned co-operative sourcing 1.45bn litres of milk from 1,800 suppliers every year
  • Turnover for 2011-12 was £579m
  • Former farm minister Sir Jim Paice will take on the role of chairman in November this year
  • Main brands include The Lake District Dairy Co, Pembrokeshire Cheddar, Mull of Kintyre, Scottish Pride and Isle of Arran
  • September 2013 manufacturing pool price of 31p/litre, compared to 26.25p/litre in 2012. September 2013 liquid price of 30.85p/litre compared to 26.05p/litre in September 2012

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