Consumers are also faced with an increase in prices to enable the company to meet the harsh market conditions.
The company confirmed in a trading update that it is considering the closure of its Nottingham dairy, which employs 215 people and is primarily a glass bottling operation. A decision will be taken at the conclusion of a 90-day consultation with employees and unions.
Dairy Crest considers that by reducing costs in its manufacturing arm, its “overall efficiency” will be improved.
In the update, the company blamed worsening economic conditions and rising production costs for the decision, citing upward pressure on milk prices from increasing on-farm costs faced by farmers.
“Over recent months our markets have become more difficult with general economic conditions worsening and upward pressure on input costs, notably raw milk, vegetable oils, packaging, energy and fuel,” Dairy Crest said in the update. “To counteract these pressures we have been focusing on delivering significant cost savings in two principal areas. Firstly we are continuing to drive costs out of both distribution and manufacturing in the Dairies division… Secondly we are in the process of implementing a reorganization of our Head Office… As well as reducing our cost base we continue to implement price increases with our customers.”
Arthur Reeves, external affairs director for Dairy Crest, told DairyReporter.com that the main focus of the reshuffling was to relocate former group jobs into the operational divisions of food and dairy, a move which would help save some positions.
Milk production in the UK is in decline: during the month of September daily milk deliveries averaged 2.5 million less than the overall average for the last three years.
Huw Thomas of DairyCo, the company which works on behalf of dairy farmers in the UK, says that the future of the industry depends in large part on what happens in the global community over the next few years. If the cost of importing milk falls below the cost of production, we could see further closures – and job cuts – in the near future.
As well as the economic situation and rising production costs, dairy manufacturers such as Dairy Crest are facing increasing competition to their “doorstep” operation from supermarkets. Although Dairy Crest continues to supply its milk to stores such as Sainsbury’s and Morrisons, its home delivery service, long a British household tradition, is under threat from the cut prices and special offers that national supermarkets are able to offer.
A pint of delivered milk costs, on average, around 58 pence. However, supermarkets can often be seen offering prices as low as four pints for £1.
Dairy Crest has responded by setting up its online “Milk & More” service, which customers can use to order deliveries not only of milk but also cheese, bread, soft drinks, cereals and other household staples. Reeves believes this is the future of the traditional doorstep service. However, Dairy Crest is rolling this service out slowly; while the trial has so far been successful, it remains to be seen whether the uptake will continue.