Scot Milk ventures into manufacturing
SCOTTISH Milk, the co-op which handles 70% of milk produced in Scotland, is expecting to expand its processing activities.
"It will be essential for any co-operative to have access to adequate milk processing facilities in the event of a totally free market," said managing director Jack Pirie, presenting the annual report and accounts at the end of last week.
The companys £3.2m venture into manufacturing, with the purchase of three cheese factories from the Scottish Pride receiver, would not be enough to cope with expanded production if milk quotas disappeared.
"We are now learning how to operate and manage dairy processing facilities, ready to expand in that sector," he said.
He also defended the failure of the co-op to buy the former Scottish Pride UHT plant at Kirkcudbright which was sold to Northern Foods for £8m. "We did bottle out. There was no way we could afford to pay that price," said Mr Pirie.
Another problem to be dealt with, by a joint indusrty approach, was that of seasonality. "It is in the interest of the whole industry to have level supplies. But we fear that falling prices will drive farmers to produce more and more from grass. Indeed, there are those advising them that it is the best route. However, it is not the way to look after customers."
• The Scottish Milk group made a trading surplus of £310,000 in the year to Mar 30 compared with £1.4m in the previous 17-month period following deregulation. Income dropped 8%, largely due to falling milk prices. But the company claimed to have paid members between 0.3p and 0.5p/litre more than Milk Marque.
Although the outcome of bad debts arising from the Scottish Pride failure has yet to be finalised, £3m has been set aside to cover any shortfall. *