Dairy Crest FY profits fall, makes functional milk debut

Related tags Omega-3 fatty acids Nutrition Milk Fatty acid Dairy crest

UK milk processor Dairy Crest announces a small slip in full year
profits and makes its first foray into the burgeoning functional
foods market - something which should provide its liquid milk
division with greater long-term stability, Tom Armitage

The Surrey-based company said yesterday that profits for the year to 31 March 2005 (before tax, amortisation and exceptional items) had dropped 1 per cent from £85.1 million the previous year to £84.2 million.

Dummond Hall, Dairy Crest's chief executive, said that this was " in line with expectations,"​ and added that the company's best-selling brands, including its Cathedral City cheddar cheese, Clover and St. Ivel yellow fat spreads and Yoplait and Frijj dairy desserts had made "encouraging progress"​.

This alone, however, was not enough to offset a decline in turnover, which dropped 1 per cent over the previous year from £1,362 million to £1,349 million.

The results announcement coincided with the launch of Dairy Crest's new omega-3 fortified milk St Ivel Advance at upmarket retailers Waitrose, ahead of a national roll out in September later this year.

Omega-3 fatty acids are said to provide adult consumers with heart health benefits, while early research has suggested that infant consumers can benefit from improved concentration and behaviour.

The Advance product, which is said to provide 50 per cent of the recommended daily intake (RDI) of omega-3 fatty acids, will be sold at a 30 to 40 per cent price premium to fresh milk and will be marketed towards parents with young children.

This price increase should provide Dairy Crest with a safer long-term path to increased margins and also provide it with an outlet for its increased milk processing capacity, which stems from the recent acquisitions of Midland's Co-operative Dairy and Starcross Foods.

Indeed, all of the UK's major processors have successfully diversified away from commodity milk; a sector where margins have become progressively squeezed and prices dictated by the power hungry multiple retailers.

Robert Wiseman's The One and Arla Foods' Cravendale fresh milk brands, for instance, which each contain 1 and 5 per cent fat respectively, are lauded as the strongest performers amid an increasingly crowded pool of branded milks.

In the short-term, however, the company will still have to overcome a number of unfavourable trading conditions.

Its contract to supply Asda with fresh liquid milk ended at the end of last month and its recently extended contract to supply Morrisons with 50 per cent of its fresh liquid milk volume will not start until October - leaving the company with a six-month stall in production and lowered profits for 2005/6.

"Whilst it has been a particularly challenging year in fresh milk with unprecedented changes in supply arrangements to major food retailers, we have continued to invest in the long-term development of our brands and we have made sound strategic moves to strengthen our dairies business for the future,"​ Hall said.

Related topics Manufacturers Fresh Milk

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