New contracts and price increases boost dairy sector

The dairy sector has received more good news as one retailer increased its milk price and another announced closer links with a farmer-owned co-op.

Waitrose, which buys its milk through processor Dairy Crest, used the launch on Tuesday (24 April) of the Women’s Institute’s Great Milk Debate to announce that its 65 suppliers would once again be getting the industry’s best milk price.

Normally at the top of the dairy price league, Waitrose was overtaken by Tesco earlier this month, when the UK’s biggest retailer stunned the sector by launching proposals for a contract worth 22p/litre to farmers.

Heather Jenkins, head of dairy buying at Waitrose, said the store was passing the full 1.7p/litre recent retail price rise to farmers, meaning they would receive about 23p/litre.

Milk Link ‘major coup’

Milk Link’s chief executive Barry Nicholls also seemed to have pulled off a major coup by winning the contract to supply all of Sainsbury’s own-label English and Welsh Cheddar.

The move, part of a sector-based review of all its cheese contracts, was also announced by Sainsbury’s boss Justin King at the Great Milk Debate.

Mr King said the contract would start this summer and would result in better returns for Sainsbury’s Milk Link farmers through an improved milk price.

Will Sanderson, Milk Link’s communications director, said the deal was particularly satisfying because it was the first time a major retailer had felt confident enough to forge such an important deal with a farmer-owned business.

Producer group

He said a Sainsbury’s producer group would be created along with a new milk-for-cheese contract. This would apply to all the co-op’s members supplying milk to its cheese plants.

As well as a better price, the details of which have not been finalised, farmers would also benefit from better returns by being able to maximise milk constituents for cheese production.

The new contract made Sainsbury’s the co-op’s biggest customer, with industry insiders predicting the contract would involve 6000t.

First Milk, another farmer-owned dairy co-op, was previously supplying a chunk of Sainsbury’s Cheddar, but a spokesman said the total loss of business amounted to only 1000t.

Tesco boost

“It’s a commercial reality that you don’t win every bit of business you pitch for. Our relationship with Sainsbury’s remains good and we will still supply it with our Mull of Kintyre and Isle of Bute Cheddars.”

In a further boost, Tesco is also believed to be considering applying a variant of its new 22p/litre liquid milk contract to cheese.

Mike Heler, of independent cheese maker Joseph Heler, which supplies territorial cheeses to Tesco, said the cheese sector was much more complicated than liquid because of the volume of imports, but was hopeful the model could be applied over the next 12 months.

Mr Heeler has just increased his firm’s milk price by 0.7p/litre on the back of improved commodity prices and increased efficiencies at the business.