Arla seeks to heal UK milk price rift

- Last updated on GMT

Related tags: Arla, Milk prices, Milk

Arla Foods UK, the UK subsidiary of Danish-Swedish dairy
co-operative Arla Foods, announced yesterday that it is to put its
milk prices on hold - a move which will appease British dairy
farmers and also temporarily heal a long-running dispute with
Robert Wiseman Dairies, Tom Armitage reports.

Following recent decisions by rival UK dairies Robert Wiseman and Dairy Crest to lower farmgate milk prices, Arla has confirmed that it will not be immediately seeking to review raw milk price arrangements with its suppliers - a move which it claims will "provide some stability in the raw milk market"​.

Wiseman was the last UK dairy to slash its milk prices, although it still pays its suppliers 19.16p per litre - 0.8p per litre more than Arla (its biggest rival) and 0.1p more than Dairy Crest.

The decision to freeze prices, however, will allow British dairy farmers to breathe a temporary sigh of relief, but Arla warned that it might consider cutting milk prices in a review scheduled for 1 April.

In a statement yesterday, Arla commented that price negotiations with the market had managed to offset inflationary pressures amounting to approximately 1p per litre, but claimed that rising fuel and raw material costs would eventually have to be clawed back from consumers and suppliers.

The Leeds-based dairy co-operative warned that imminent mid-term CAP reforms would further lower beleaguered British dairy farmers' support prices, as well as squeezing their profit margins - although this would be eased partially through the implementation of direct payments.

Meanwhile Arla also announced the closure of its Stratford liquid milk distribution centre, east London, which it acquired back in 2002.

The co-operative has recently made a number of significant structural changes to its organisation, following a merger with Express Dairies in 2003. Arla has already closed its dairy processing operations in Northumberland, Lancashire and Essex, and restructuring will eventually result in a cull of around 1,500 jobs.

On a more positive note, however, Arla has attained planning permission for a new £16 million (€23 million) processing facility in Lockerbie and is poised to make an assault on Wiseman's current dominance of the Scottish liquid milk market, having already signed an agreement to supply number two UK multiple retailer Asda with liquid milk across its Scottish stores.

According to Arla, trading over the Christmas period had been in line with expectations, bolstered by the continuing retail dominance of its Lurpak butter brand which last year notched up retail sales of £151 million (€217 million).

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