Wexford Milk Producers (WMP), a cooperative of 350 farmers, is in advanced discussions with Dairy Crest to increase their share in the Ireland-based Wexford Creamery from 20 to 70 per cent.
This €9m move, which is expected to be finalised in March, will help Dairy Crest to further reduce its bank debt which is currently at its lowest level in three years.
But for Dairy Crest the reasons behind the agreement with WMP are as much strategic as they are financial.
Martyn Wilks, executive managing director, said the transaction is another step in a broader strategy to “focus on a small number of key brands”.
External affairs director Arthur Reeves told DairyReporter.com that this means channeling marketing energies on the five big brands at Dairy Crest, which are Cathedral City, Clover, Country Life, and St Hubert.
Wexford Creamery, which achieved a turnover of €56m last year, does not fit into this core brand orientated strategy.
Processing supply chain
Dairy Crest also said the Wexford Creamery deal reflects a recent trend for farmers to take ownership of more of the milk processing supply chain.
Reeves said: “Dairy farmers want to have greater control over where their milk goes once it leaves the farm gates.”
The trend has taken hold since the Milk Marketing Board was disbanded in the UK. Without the stabilising influence of the Board dairy farmers have looked upstream to gain more control of the destiny of their milk.
At Wexford Creamery, this means that farmers will take greater control and ownership over the cheese manufacturing while Dairy Crest will continue to pack, distribute, and sell the finished products on their behalf.
WMP chairman, Michael Vaughan said: “This is a tremendous opportunity for WMP to determine our own future.” Vaughan also said he was pleased that Dairy Crest is maintaining a 20 per cent stake in the Creamery and will assist in the development of the business.