DFOB ponders future UK dairy strategy

Related tags Milk

The UK's third largest dairy processor claims that up to 60 per
cent of British dairy farmers are failing to make a profit, despite
announcing in its interim results yesterday that it had notched up
an increase in pre-tax profits of 47 per cent, Tom Armitage

Dairy Farmers of Britain (DFB), which processes over 1.3 billion litres of milk per year, says that sales have risen by 22 per cent for the six months to the end of September - positioning it as the third largest dairy processor behind First Milk and Milk Link.

The co-operative said that its acquisition of Associated Co-operative Creameries, bought for a reported £78.8 million in August last year, had helped it "move into dairy processing in a major way,"​ as well as up turnover by more than £47 million on the previous year to £265 million.

Malcolm Smith, DFB's CEO, noted that the trading period had been important "strategically"​ and claimed that the co-operative's main long-term objective was to "provide a sustainable milk price"​ for its 3,250 member farms.

"We need to improve efficiency and drive innovation, whilst simultaneously tackling the full integration of our food production businesses connecting our brands with the retail chain and the consumer,"​ he added.

Currently DFB's branded product line-up includes Dairygate organic and liquid milk, Capricorn Goats Cheese and Somerset Brie. The co-operative is also the leading supplier of dairy ingredients in the UK.

Although the British dairy industry is generally suffering, on the back of reduced farmgate milk prices and mounting production costs, a spokesperson for DFB told DairyReporter.com​ that "the acquisition of ACC has added some key brands to our existing product line-up, moved DFB further up the supply chain and consequently left us in a much better position."

DFB declined to confirm exactly which product categories it would be pursuing as part of its long-term strategy to develop profitable brands, but claimed that it would retain a "broad product base"​.

The co-operative also said that "the liquid milk market (referring to both branded and commodity sales) appears to be the most defendable market segment at this time,"​ which may see it develop brands to stand alongside Robert Wiseman's successful 1 per cent milk brand The One and Arla's leading branded liquid milk product Cravendale.

Although the acquisition of ACC (which had an estimated turnover of £460 million in the last financial year) was yet to deliver any profits back to its members, DFB stressed that its integration would provide it with "real long-term benefits."

As a result of the acquisition agreement between DFB and ACC, the merged co-operative now controls an estimated 5 to 10 per cent of the UK's milk supply, comapred to estimated shares of 18.5 per cent for both Dairy Crest and Robert Wiseman and 23 per cent for Arla Foods UK.

At the time of the merger, the UK's Office of Fair Trading noted that many third party figures in the dairy industry had in fact welcomed the development, as it would help to "redress the imbalance of power within the dairy supply chain."

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