Unigate tempts UM members to direct supply

26 November 1999

Unigate tempts UM members to direct supply

By Robert Harris

ALMOST a third of United Milks 800 farmer members have agreed to supply Unigate direct, despite UM board claims that the dairy giant is attempting to split the group and foil its processing plans.

But UM insists that most members remain committed to its long-term aim of processing milk, and that it can replace those that do not.

It was UMs decision to go into processing – taking with it the 500m litres of milk a year it supplies to Unigate – which triggered the processors push to buy direct (Business, Oct 1).

Unigates new Business Deal Direct is worth about 17.8p/litre to the farmer, 0.5p more than UMs price, through a higher loyalty bonus and cheaper transport charges. "Clearly, the long-term value to Unigate is reflected in the price," says David Lattimore, Unigates milk director.

He claims 240 members have signed up. "We have no problem with United Milk going into processing. But we would be nowhere without security of supply."

Although Unigate is under a three-year contract with UM, Mr Lattimore hopes to end it sooner, saying it is in no ones interest to maintain it. He is holding talks with other groups, including Milk Marque successor co-ops, to make up the shortfall.

UM chief executive, Don Morris, says it is nonsense to suggest that UM membership is declining. In a recent survey of members, 70% of the 580 farmers supplying Unigate via UM replied, says Mr Morris. "Of those, 80% said they would not supply Unigate direct."

That leaves 255 members who either said they would, or were undecided, he agrees. "But all this hyperbole that people are leaving is quite ridiculous, although there is a strong feeling in the membership that they should not have signed. Subscriptions are not due until April. No one has said they are leaving and we hope they continue to support our aim."

He anticipates strong support when detailed proposals of the new £30m liquid milk processing venture are presented to members early in the New Year.

The newly formed Scottish Organic Milk Producers Association is also pushing the co-operative message hard. The group, formed last week, represents members with the potential to supply up to 8m litres a year by 2001.

"It is utter stupidity for producers to sign direct supply contracts," says secretary, Michael McCreath. "Going for short-term gains is short-sighted. Organic producers have real negotiating power with processors and retailers. It would be ridiculous to throw that away."

Simon Tomlinson, chairman of the Organic Milk Suppliers Co-operative, delivered a similar message at the groups recent AGM.

"OMSCo is determined to stave off the threat of a fragmented market. We believe the best way forward is to establish very strong, long-term relationships with buyers based on a sustainable price which provides a good and fair return to our farmers."

The group recently secured an extension to the five-year price and volume agreement with Sainsbury, guaranteeing an ex-farm price of 29.5p/litre for that period. It has also entered into a profit share agreement with processor Yeo Valley.

The group now has 62 full members, twice the number a year ago, and 131 converting members. &#42

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