UK dairy giant Muller has announced it needs to find £100m of savings from within the business in order to address profitability issues.
Muller’s UK operation launched its margin improvement programme, named project Darwin, after citing significant changes in the dairy market environment alongside notable global dairy market volatility.
The processor said the 12-month project would simplify the business and would include a comprehensive review of the milk buyer’s manufacturing, logistics, back office, people organisation, products and procurement.
Project Darwin comes just a fortnight after Muller cut its March milk price for its non-aligned producers by 1.25p/litre, spurring its producer board to release its first ever public statement.
The Muller Milk Group (MMG), a panel of elected Muller dairy farmers, warned that next month’s price of 26.25p/litre would make milk production financially unviable.
MMG estimated the price cut would leave Muller’s 650 non-aligned suppliers £46.4m a year worse off than their supermarket-aligned counterparts.
Tough decisions and a great deal of change would need to be made, according to Muller Milk and Ingredients CEO Patrick Muller, who was appointed managing director following the departure of Andrew McInnes last September.
“The market environment has changed significantly due to global dairy market volatility, decline in consumption and changes in retailing.
“We need to adapt and return to sustainable levels of profitability so that fresh milk can continue to be part of the fabric of British life,” said the Muller boss.
“When Project Darwin succeeds, consumers, customers, employees and farmers will benefit, and we can again look forward to a vibrant and progressive future.”
Mr Muller said the processor had the best-invested network in the industry and retained ambitions to be the leading fresh milk processor in the country for years to come.
UK liquid milk market difficulties
Last October, Muller announced an operating loss of £132m for the year ending 31 December 2017.
At the time, a spokesperson cited challenges of trading in the UK liquid milk market, adding that the business’ focus was on identifying cost reduction activities within the supply chain.
In December 2015, Muller finalised its £40m takeover of DairyCrest’s liquid milk business.
Mark Allen, DairyCrest chief executive at the time, said the nine years he spent trying to get out of the UK liquid milk market was absolutely necessary, pointing to the £143m of losses the company had accrued over the previous four years.