17 September 1999
The end of Milk Marque
By FW staff
MILK Marque, the countrys biggest supplier of raw milk, is to be voluntarily wound up and split into three independent competing companies.
The widely-expected announcement came on Friday morning, after months of pressure and accusations that Milk Marque had abused its dominant market position.
Milk Marques end will come as a bitter blow for many dairy farmers. But it will allow the new companies to expand into the lucrative milk processing sector.
The three new companies will each have a 12-13% share of the market for raw milk equivalent to about 1.6 billion litres and roughly 4,000 farmers.
The company covering the northern region includes farmers in England and Wales who farm north of a line running approximately from Aberystwyth to the Wash.
The southern region will cover Cornwall, Devon, and all counties south of a line running approximately from Somerset across to London.
The midland region company will include farmers who produce milk in south Wales, the midlands and East Anglia.
There will be no common directors between the three independent organisations which could be trading as early as 1 April next year.
Plans will be put before the farmer-owned co-operatives existing members later this month and voted on at an extraordinary general meeting in late October.
Milk Marque Development, the co-operatives existing processing arm, will kept as separate company but could be put up for auction at a later date.
If the proposals are given the go-ahead, board members for the new companies will be elected almost immediately.
The companies will then start talks with potential customers in late December and early January in an attempt to agree a price for the milk they will sell.
The move follows a report earlier this year by the Competition Commission which accused Milk Marque of abusing its dominant market position.
Commission officials had called for the enforced break-up of the farmer co-operative but their demands were rejected by Stephen Byers, the trade secretary.
Instead, Mr Byers imposed restrictions which severely limited Milk Marques plans to expand into the dairy processing sector.
Milk Marque executives said on Friday they fundamentally disagreed with the Competition Commission report.
But there would have been a continual battle with the regulators had Milk Marque continued in its present form, said Poul Christensen, Milk Marques chairman.
“That is not a scenario I can recommend to anyone,” he said.
Mr Christensen said the decision to split Milk Marque had been made after discussions with the co-operatives farmer-members.
Members told Milk Marque they needed to be free from regulatory control and couldnt continue with the Office of Fair Trading scrutinising their every move.
Farmers will hope the three new companies are still large enough for them to supply milk to dairy processors efficiently on a regular basis.
Under the new set-up, producers supplying milk will be closer to market and their customers and will have the opportunity to add value to their raw product.
The three smaller companies will be able to expand into the processing sector without attracting the attention of the OFT.
It is too early to say what effect the end of Milk Marque will have on the value of raw milk but it is unlikely the reorganisation will be funded through a price cut.
Paul Beswick, Milk Marques managing director, said he was reasonably confident there was enough money in the Milk Marques reserves to avoid such a move.