Two dairy co-operatives operating in the northern half of the island of Ireland are to merge, creating the second largest dairy processing business in Ireland.
Shareholders of dairy processing co-ops Lakeland Dairies and LacPatrick Dairies have voted resoundingly in favour of the merger, which is expected to be completed in early 2019, subject to regulatory clearance.
It is the latest in a wave of mergers along the food supply chain, involving retailers, agro-chemical manufacturers and grain co-operatives.
Lakeland Dairies currently buys milk from 2,200 farms and operates across a catchment of 15 counties, some in Northern Ireland and some in Ireland.
The group processes about 1bn litres of milk annually into a range of value-added dairy foodservice products and functional dairy food ingredients.
LacPatrick also operates cross-border, with its 1,000 farmer suppliers based in all counties of Ulster.
It is a major supplier of dairy products to retail and food service customers across the island of Ireland.
The merged business will be known as Lakeland Dairies and will have a milk pool of 1.8bn litres, two-thirds of which will be collected in Northern Ireland from 1,350 suppliers (600 LacPatrick and 750 Lakeland).
Victor Chestnutt, deputy president of the Ulster Farmers’ Union, said the decision ended months of uncertainty and would bring challenges and opportunities for dairying in Northern Ireland.
“The new business will have a strong balance sheet to make progress and act quickly to develop a plan to drive efficiency,” he said.
“Centralising and rationalising its operations must be at the core of the merger agenda.”
But Mr Chestnutt pointed out that in July, the UFU criticised the 2.5p/litre base price gap between the highest and lowest milk buyers in Northern Ireland.
“While this has been trimmed back slightly it remains sizeable and must be tackled as part of this merger.
“An improved milk price will stabilise the new Lakeland milk pool.”
Michael Hanley, chief executive of Lakeland Dairies, said the combined organisation would be a competitive, international dairy food business.
“It will deliver economies of scale and commercial synergies, processing increased volumes of milk and providing greater capability to address global customer needs for high quality dairy foodservice, food ingredients and consumer products.”