Asda makes British cheese pledge to Dairy Crest

By Chris Mercer

- Last updated on GMT

Related tags: Dairy crest, Supermarket, Milk

Britain's second biggest supermarket, Asda Wal-Mart, has attempted
to head off supply chain complaints by signing a two-year deal to
buy cheese from a Dairy Crest plant in northern England.

Asda, which will source the cheese from Dairy Crest's Aspatria dairy in Cumbria, said it would also only review forward prices every six months. This, it claimed, would give farmers more stability in the market so they could plan ahead.

The move comes amid a Competition Commission investigation of the UK grocery chain, following complaints of supermarkets' ruthless bargaining tactics and the low prices passed on to producers for their products.

A number of big dairy processors have dropped their farmgate milk prices in recent months, keeping British producers firmly at the bottom of Western Europe's milk price league table.

Asda said its deal with Dairy Crest was part of its new commitment to source more food from the UK. It called on rival supermarkets to follow its example.

The retailer recently launched its 'End the Cheddar Lottery' campaign. It claimed it bought all its cheddar cheese in Britain, unlike some rivals, which went to a number of countries for their cheddar, including Ireland, Poland and New Zealand.

Britain's National Farmers' Union (NFU) welcomed Asda's deal with Dairy Crest Aspatria, which produces around 80 tonnes of cheese per day.

"The British dairy industry needs longer term commitments to give dairy farmers confidence and this initiative is a welcome step towards achieving that objective,"​ said Tom Hind, NFU chief dairy advisor.

"However, there is still much more to do and we would encourage all retailers to build relationships like this and to move away from the practice of short term tenders, which are very often used for imported cheese."

The NFU has repeatedly said the current situation in the dairy supply chain, with uncertainty and low farmgate prices, is not sustainable in the long-term.

It launched another attack on dairy processors this Tuesday, accusing them of swallowing higher returns for wholesale cream without passing on benefits to producers. "They are literally creaming off the extra cash," said Mansel Raymond, vice-chairman of the NFU's Dairy Board.

Processors say they are under intense cost pressure from tough retailer pricing and soaring energy and packaging costs.

It will be the Competition Commission's unenviable task to investigate practices at different levels of the supply chain. It has called for comments from all concerned by September, but the investigation may not be complete until autumn 2008.

The UK Department for the Environment, Food and Rural Affairs (DEFRA) said in June it wanted the Commission to examine supermarket buying power.

"Our concern is that continued pressure on suppliers to reduce prices might have a negative impact on the viability of businesses at stages within the chain,"​ said DEFRA in its submission, warning that this may harm consumer choice.

"However, it is also possible that downward pressure on prices could have the effect of encouraging greater efficiency and innovation within the chain,"​ it added.

Related topics: Markets, Cheese

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