UK cooperative opts out of dairy production

By Neil Merrett

- Last updated on GMT

Related tags: Dairy crest, Business

Dairy Crest and the East of England Co-operative Society are in
discussions over the sale of the latter's dairy operations as it
struggles to meet the growing costs of development and processing
in the industry.

The sales announcement this week comes as the socitety said that declining demand for its dairy products, uncertainty over milk supply and high levels of price volatility had made any long-term commitment to local dairy production unsustainable. A spokesperson for the co-operative group - The UK's third largest independent retailer - told DairyReporter.com that jobs was the key issue in resolving discussions for a planned transfer of its dairy distribution business in February. The company also expects to close its Ipswich processing plant as part of the focus, during March. Following a strategic review of it operations, the society claims that significant levels of investment would be needed to maintain and upgrade their dairy processing plant at Boss Hall, Ipswich. Group chief executive Richard Samson said therefore that although it had been involved in dairy production for many years, the high cost of adapting to changing consumer demands had forced it to focus on retailing instead. "Sadly, the market has changed considerably and it is clear that the future lies with large-scale national operators with facilities to meet the increasingly varied and specialist needs of consumers,"​ he stated. "In recent years, we have been the onlyUKCo-op to retain dairy operations but the time has come to concentrate our efforts in other areas of our business."​ The East of England Co-operative Society said it has therefore began working with Dairy Crest over the acquisition and transfer of its dairy distribution service that operates throughout the East Anglia region. The company added that the handover was expected to ensure a seamless transfer of service to Dairy Crest, for consumers and milk suppliers alike, while it would continue to sell the product at all of its retail outlets. The group spokesperson added that Dairy Crest did already have its own large processing plant in the vicinity at Fenstanton, Cambridgeshire, making it unlikely that they would be able to keep the Ipswich processing plant open. As part of a TUPE agreement, which specifically relates to transferring an entity within the UK, 300 of co-op's employees in Norfolk, Suffolk and Essex will be taken up by Dairy Crest along with the operations. However, 58 jobs are expected to be lost though as a result of the Ipswich dairy closure. In announcing the sale, the Co-operative said it would instead focus it operations on food retail by moving ahead with a £40m regional development programme. The initiative funded through the group's own resources will include the purchase of 20 Anglican convenience stores and the construction of a £5m Co-op supermarket in Colchester.

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