Dairy co-operatives must develop a more businesslike approach if they are to succeed in the future, according to the president of the Royal Association of British Dairy Farmers.
John Beckett told delegates at a dairy conference at the Royal Bath and West Showground, Somerset, that the time was right for co-ops to rethink their strategies, learn from PLCs and move forward.
“Our current milk co-ops have made great strides forward,” he said.
“However, they continue to reflect the state of the entire dairy sector which lacks a clear strategic plan.
They have a burden of debt, no profit, the lowest milk prices, no growth, and, ironically, the rest of the industry is stronger.”
Mr Beckett said his mission statement for co-ops was to prioritise increased milk prices with limited investment for maximum profit.
They also needed a clear vision and the will to take on a strategic approach, mimicking that of a PLC.
Certain co-ops were proposing further acquisitions, but they had to ensure they would be earnings-enhancing, he said.
“We must stop buying things we don’t need and instead invest in joint ventures and contract processing.”
Mr Beckett set out a 10-point plan for co-ops.
Factories should be rationalised, co-ops should merge and they must promote more businesslike structures and attitudes within their boards, he said.
They should also buy direct from farms, not through brokers, and use an independent analyst to report on their accounts.
“The milk co-ops need to demonstrate they are driving for profit.
Adopting a PLC approach to business would realise a sustainable milk price for all.”
Rex Ward, vice-chairman of Milk Link, reckoned his firm’s business model was succeeding.
Addressing the conference on the subject of retaining producer loyalty, he said:
“We’re determined to build partnerships across the whole supply chain in order to secure sustainable milk prices for our members.
“We now have the ability to process 10% of the country’s milk.
The benefit of investing in processing is that we can be a price maker not a price taker.
We plan to process at least 75% of our members’ milk by 2010 and return 1-2p/litre over the raw commodity price of milk.
The co-operative and vertically integrated model is undoubtedly the right one.”