Yorkshire-based cheese maker The Wensleydale Creamery has launched a traditionally churned butter in a bid to capture a piece of £680 million UK butter market. The Wensleydale Creamery, which previously produced butter last in the 1980′s, has introduced its new product ‘Dales Butter’, to complement its award winning range of core and blended Real Yorkshire Wensleydale Cheeses.

The Wensleydale Creamery will use its 115 years of dairy expertise, along with milk supplied by local Dales farming families, to produce the new butter. The premium product, made from fresh Wensleydale cream, will be wrapped in stylish black packaging.

David Hartley (pictured), managing director of The Wensleydale Creamery, says: “We have had constant calls from our loyal customers for the return of our regional butter, which prompted us to develop Dales Butter. We believe this new premium butter perfectly accompanies our current offering of branded cheeses.”

Dales Butter will be sold through independent retailers and from the Visitor Centre at The Wensleydale Creamery. The business then hopes to roll this out into supermarket chains this year. The Wensleydale Creamery supplies 44% of the Wensleydale cheese sold by UK retailers.

Dairygold Co-op, one of Ireland’s largest dairy processors, has confirmed its post quota strategy. As a farmer owned co-operative Dairygold has committed to accept all the milk that its Members would produce post quota. Through comprehensive surveys Dairygold’s milk suppliers have themselves forecast of a 63.5% increase in milk production from 941 million litres in 2011 to 600 million litres a year extra by 2020.

In order to facilitate that expected increase, the Society has agreed a carefully planned and phased investment of Eur120 million over the next eight years to incrementally expand its weekly processing capacity by 18.5 million litres by 2020.

Dairygold’s product strategy is firmly established in cheese and dairy ingredients and its expanded product profile will focus on these core products. Dairygold’s three existing processing sites at Mitchelstown, Mogeely and Mallow have capacity for varying degrees of expansion. Sweating these existing facilities makes absolute sense for Dairygold as they offer established infrastructure, which will reduce the capital cost of expansion.

Dairygold is already investing from its existing cash reserves to increase its weekly processing capacity by 4.3 million litres (15%) by 2014. This comprises expansion at its speciality cheese plant at Mogeely and its Cheddar plant at Mitchelstown, the latter is one of the largest in Britain and Ireland.

Dairygold plans to invest Eur120 million to add another 18.5 million litres weekly capacity up to 2019. This will comprise of an upgrade of the existing dryer in Mitchelstown and the development of two 7.5 tonne/hour dryers in Mallow, one in 2015 and one in 2019 or earlier if required.

In addition to Eur120 million capital investment required for expansion an associated Eur50 million increase in working capital will also be required to accommodate the extra volumes of product with long lead times before customer payment. The Dairygold board has agreed that the investment required cannot be funded from operating surpluses, existing reserves or entirely from bank debt and an element of Member funding is required. Based on projected financials and corporate finance evaluation the Member funding required is in the order of Eur50 million.

Swiss dairy group Emmi has further strengthened its international business by increasing its stakes in Kaiku Corporacion Alimentaria in northern Spain (from 42.6 % to 66 %) and Diprola in France (to 63 %). In the medium term, Emmi’s strategy is to increase the share of sales generated by its international business from 30% to 50%. This growth is to be achieved organically and through acquisitions. By increasing these two stakes, Emmi is taking a further significant step forward in its internationalisation.

Kaiku’s main markets are Spain, Chile and Tunisia. The company is market leader in northern Spain with regional brands and leads the Spanish market in the area of lactose-free milk and chilled coffee beverages. In 2011 Kaiku generated sales of Eur278 million. Thanks to the partnership with Kaiku, sales in Spain of Emmi Caffe Latte, produced in Ostermundigen (Switzerland), increased by more than 70% in the first five months of the current year, a growth rate bigger than in any other market.

Kaiku’s particular advantage is its broad geographical diversification – over half of the company’s sales are in fast growing markets outside Spain, notably in South America (in particular Chile). It is also successful in Tunisia, where it has a majority shareholding in Vitalait, the country’s second leading player. Emmi’s increased participation in Kaiku will enable it to benefit from rapid and strong growth in these markets.

Since January 2008 Emmi and the Italian cheese specialist Ambrosi. have been expanding the distribution of Swiss and Italian cheeses in France through the jointly owned company Ambrosi Emmi France. In January 2010 the two companies acquired a combined 25% stake in the French cheese packaging specialist Diprola, which operates in the market under the name ETS Schopfer. The company operates in France and Germany.

Emmi and Ambrosi have now decided to fully acquire the French company, which is headquartered in theAvignon. Emmi will be the majority shareholder with a stake of 63%. Diprola commands a strong position in the fresh packaging (frais-emballe) and distribution of cheeses from Switzerland, Italy and France.

Freshly packaged cheese has been a growth segment in Emmi’s key European markets for a number of years, and is also becoming increasingly popular in the Swiss retail trade. The acquisition of Diprola will enable Emmi to increase its access to know-how in this specialised area of cheese packaging, while also allowing it to further strengthen its position in the European cheese market by further exploiting the export potential of Swiss cheese.

Carbery Group, the Irish and international food ingredients, flavours and cheese manufacturer, had a positive year in 2011 with revenues increasing by 14.5% to Eur256.5 million and profit before tax advancing 27.8% to Eur8.7 million. Carbery’s 2011 performance reflects an underlying strong performance from the Ingredients division whilst by contrast its Ireland-based Cheese division had a challenging year principally due to market returns for cheese under-performing relative to other dairy products.

The weak cheese markets had a significant effect on performance as Carbery is a substantial manufacturer of cheese and produces a range of cheeses including mature cheddars and reduced fat cheddars. Its flagship brand, Dubliner continues to grow in export markets, particularly in the US. Carbery’s Ingredients business, which includes its flavour business, Synergy, as well as its dairy ingredients business, had a strong year. Synergy continues to grow in existing markets and establish itself in new markets, acquiring two new flavour businesses in the US.

Like all other dairy businesses, Carbery Group is addressing the opportunities and challenges that will come with the removal of quotas in 2015. It has just completed a milk supplier survey regarding additional milk output post 2015. In short, the survey indicates that West Cork suppliers from Bandon, Barryroe, Drinagh and Lisavaird Co-ops intend to increase milk supply by up to 45% between 2015 and 2020. While Carbery has processing capability in place to handle this extra production, over the next few years it will address associated challenges such as working capital requirements and developing markets for this extra output.

As well as preparing to process and market extra product post 2015, Carbery also plans to launch a scheme whereby it will align milk supply to shareholding for milk suppliers. This scheme will address certain key issues, amongst them that of securing milk processing capability for expanding milk suppliers and that of accessing shareholding value.

UK dairy co-operative First Milk has received planning approval to redevelop its cheese packing site at Maelor near Wrexham, to create a UK centre of excellence for cheese packing and storage. As well as the redesign and rebuild of First Milk’s cheese packing operation, Grocontinental, one of the UK’s leading storage and distribution companies, has also received the green light for the construction of a cold store on the Maelor site that will house all of First Milk’s maturing cheese.

Work will begin shortly on the redevelopment and is scheduled for completion in Autumn 2013. The total cost of the site redevelopment will be £17 million.

First Milk’s manufacturing director Paul Rowe comments: “This redevelopment builds on the significant investment in new technology at the site over the last eighteen months. We have had very positive feedback on our proposals from our retail customers, who can see the clear benefits from the redevelopment in terms of workflows, efficiencies and the scope it provides to increase production.”

Reflecting strong performances from both its Irish and US operations, Glanbia, the global nutritional solutions and cheese group, has reported a 17.9% rise in operating profit to Eur161 million on revenue up 23.3% to Eur2.67 billion for the year ended December 31st 2011. Operating margin dropped 30 bps to 6% due largely to input cost pressures in performance nutrition.

On constant currency basis, Glanbia’s US Cheese & Global Nutritionals division increased revenue by 35% to Eur1.38 billion and operating profit pre exceptional increased 21.3% to Eur113.8 million. Glanbia has invested significant resources in recent years to develop and enhance its US Cheese & Global Nutritionals division. The acquisition and successful integration of BSN into Performance Nutrition complemented strong organic revenue growth during 2011.

Positive global dairy markets underpinned a solid performance by Dairy Ireland despite the challenges of the Consumer Products business. The Dairy Ireland business grew revenue by 19% to Eur1.35 billion and operating profit pre exceptional increased 23.2% to Eur53.6 million.

“Glanbia achieved excellent results in 2011 delivering 26.7% growth in adjusted earnings per share, on a constant currency basis,” says John Moloney, group managing director of Glanbia. “We expect the operating environment in 2012 to be more challenging than in recent years. Current global economic uncertainty has the potential to impact global dairy markets and fragile consumer confidence. The group’s focus on driving growth in nutritionals, combined with deep dairy market expertise and strong execution capability, position us well for the future. Our guidance for 2012 is for 5-7% growth in adjusted earnings per share, on a constant currency basis.”

The final phase has commenced of Project Vision – Milk Link’s four year programme to transform its Oswestry production facility into one of the UK’s foremost cheese cutting and packing plants. The last stage of the project, entailing a further £2 million investment, has seen the installation of an additional advanced high speed, fully automated, cutting and flow wrapping line.

The line uses the latest laser scanning technology to minimise offcuts and giveaway and is delivering significantly improved packing rates. This will be complemented by the installation in the early summer of a further high speed, intelligent cutting line. This more compact unit has been developed to maximise the performance from smaller run lengths.

In addition, work will also shortly commence on the automatic palletisation of all of Oswestry’s cheese portions and slices product lines. The new robotic equipment will be installed and commissioned by the end of April, delivering further efficiencies and faster run rates.

Carl Ravenhall, managing director of Milk Link Cheese, comments: “Project Vision has transformed Oswestry, increasing its capacity and capabilities and is enabling Milk Link to respond to growing customer demand for our cheese. The investment is fully in line with our strategy of implementing fast returning capital projects and will deliver a range of benefits including consistent quality and service for our customers, improved yields and reduced wastage.”

The global dairy market will offer strong growth prospects in the coming five years, but the uneven spread of this market expansion and an era of elevated pricing will create as many challenges as opportunities for key players along the dairy supply chain. This is one of the key conclusions coming from the Rabobank Food & Agribusiness Research and Advisory report, ‘Global Dairy Outlook: Show me the money’.

Rabobank forecasts that the global dairy market will expand at 2.4% pa over the next five years but that growth will be unevenly spread, generating some important market dynamics.

Growth will be highly skewed to emerging markets, with countries like China, India and South East Asia expected to account for more than 80% of market volume growth, while western markets continue to mature. Supplying these growth markets, many of which are already in supply deficit, with safe and affordable milk in coming years will require considerable advancement on many fronts: including the development of safe domestic supply chains in emerging markets and the expansion and marketing of surplus production in export regions. “Tapping into emerging market growth will present a particular challenge for many of the world’s dairy processors, most of which are domiciled in, and still focused on, the EU and US markets,” points out Tim Hunt, global dairy strategist for Rabobank.

Opportunities will also be uneven across product categories. In particular, economic, demographic and dietary trends are likely to see cheese sales underperform the broader dairy market. With sales of higher end whey product set to track a much faster growth path, the strategic value of whey pools is rising rapidly. “The divergence of cheese growth and whey demand represents a major structural shift in the market, and justifies a re-evaluation of ingredient production and sourcing strategies,” he explains.

Rabobank forecasts that solid market growth, supply constraints and a structural shift in the costs of producing milk will sustain high milk and dairy commodity prices over the medium term. But this will not translate to increased profits for all.

The processing sector is confronting enormous challenges from high and volatile input costs, difficult economic conditions and retail power. In general the processing sector has managed to maintain or improve their margins, through a combination of stripping costs, trading to higher value-added products and passing through cost increases to consumers. But experience has varied greatly by sector, with Fast Moving Consumer Goods (FMCG) players like Nestle and Danone faring well, cheese makers also improving their returns, while liquid milk players and major Chinese processors have seen their returns decline.

Swiss dairy group Emmi increased net sales by 1.4% in 2011 to SFr2.72 billion (Eur2.25 billion) thanks to the encouraging performance of its latest acquisitions, to significant international growth and to newly launched products in Switzerland. The net profit margin for 2011 will be around 3%.

However, in organic terms (adjusted for the effects of acquisitions and currencies) net sales at group level fell by 1.9%. This figure is just short of expectations and is attributable to the adverse economic environment. Emmi has decided to stabilise earnings by not aiming for short-term growth.

Net sales in Switzerland declined by 2.1% to SFr1.91 billion primarily due to the abandonment of unprofitable logistics services for third parties and lower volumes in trading business. In international markets, Emmi achieved a 10.9% increase in sales to SFr811.4 million. This increase is at the upper end of Emmi’s expectations and can be attributed to the outstanding performance of its latest acquisitions (Onken, Cypress Grove Chevre and A-27), growth at Emmi Roth USA and improved sales of Emmi Caffe Latte. Growth was restrained by losses resulting from the strength of the Swiss franc, especially in exports of Swiss cheese. In local currencies and adjusted for acquisitions, growth of 3.2% was achieved.

“Given the extremely challenging environment, the result is an impressive one. I am particularly pleased by the outstanding performance of our most recent acquisitions. Our carefully considered acquisition strategy is paying dividends,” comments Urs Riedener, chief executive of Emmi.

Emmi expects raw milk prices to remain at their present level in the first half of 2012, while prices for other raw materials (coffee, fruit and cereals) and packaging costs are likely to remain stable or increase only slightly. Import pressure will persist in Switzerland. Demand in the retail trade is expected to be volatile.

Emmi expects consumer sentiment in the US and Germany- its most important markets outside Switzerland- to remain stable and to be subdued inItaly. In view of the economic situation and the value of the Swiss franc standing at 1.20 against the euro, Emmi’s success in 2012 will largely be driven by its strong brands and by products produced locally abroad, as well as by further cost savings.

Bel, the family-owned French cheese group, is to invest $100 million, through its subsidiary Bel Brands USA, to build a new cheese plant in the US. Chicago-based Bel Brands USA, which manufactures and markets the Laughing Cow brand, plans to construct the 170,000-sq-ft plant in South Dakota. The new facility will make the group’s Mini Babybel snacking cheese.

Bel Brands USA, which has doubled sales in the last four years, operates two existing plants in Kentuckyand Wisconsin. The new factory will initially employ 200 people.

Arla Foods has taken another significant strategic step into Russia by agreeing a joint venture for the production of yellow cheese with Molvest Group, the country’s third largest dairy company. The agreement is in keeping with Arla Foods’ ambitions to become one of Russia’s leading dairy companies within yellow cheese.

Following several years of growing exports to the Russian market, Arla Foods now intends to set up local production in Russia for the first time. Production will be centered on the city of Kalacheevsky in south-west Russia, where Arla Foods’ Russian subsidiary – Arla Foods Artis – in partnership with the Molvest Group will be converting one of  Molvest’s existing dairies to yellow cheese production. The two parties have agreed on terms for joint production at the dairy. The terms and conditions are subject to approval from the Russian Federal Antimonopoly Service (FAS).

Peder Tuborgh, chief executive of Arla Foods.

Molvest will be responsible for collecting the milk from farms in the area as well as weighing-in and processing the milk at the dairy. Arla Foods will subsequently buy the milk and with its experience and expertise from its Scandinavian operations will be responsible for the production of yellow cheese at the dairy. The finished products will be distributed and sold by Arla Foods. For Arla Food, the conversion of the dairy represents an investment of DKr25 million (Eur3.4 million).

Arla Foods and Molvest anticipate joint production will begin in early 2013. Initially, the aim is to produce approximately 6,000 tons in 2014, with a subsequent annual volume increase of 10%.

”As Russia is one of our strategic growth markets this agreement is important because it provides us with the opportunity to combine our export business to Russia with local production,” says Peder Tuborgh, chief executive of Arla Foods. “This is unlikely to be our final expansion into the Russian market but this agreement alone is expected to double our turnover in Russia before the end of 2015.” Arla Foods’ Russian business grew by about 30% in 2011 to DKr500 million – growth that was largely driven by exports of Lurpak butter, Castello speciality cheese and cream cheese under the Arla Natura brand.

UK dairy co-operative First Milk is to receive £2 million funding from the Scottish Government towards the cost of installing a brand new cheese-making facility at the company’s existing site in Campbeltown on the Mull of Kintyre. This secures the future of 38 dairy farms and 100 jobs on the Scottish peninsula.

The new factory will allow for increased production and provide processing efficiencies which cannot be achieved at the current plant. Over the past two years, First Milk had progressed plans to sell its existing Campbeltown site to Tesco and backed by grant funding from the Scottish Government, relocate to a new location in the town.

The existing Campbeltown creamery was built in the 1820s as a whisky distillery before being converted to a cheese manufacturing facility. However, Tesco has now indicated that it no longer wishes to purchase the site in order to build a larger store in the town, as a result the creamery will remain at its current location.

First Milk’s chief executive Kate Allum comments: “Throughout this process we have remained absolutely committed to our farmers on Kintyre, to the creamery and to the development of our world-famous Mull of Kintyre brand. With that in mind, we will invest in a brand new cheese-making facility at our existing site, aided by grant support from the Scottish Government.”

She continues: “We have met with farmers and employees in Campbeltown to inform them of these developments, and agreed to work as one team alongside the Scottish Government to develop a long term sustainable future for the dairy industry on Kintyre.”

British dairy co-operative Milk Link has now recruited over 40% of the milk it requires for the expansion of its Lockerbie Creamery in Scotland. This securing of about 50 million litres of additional milk on a long term basis means that the business is ahead of its recruitment targets, both in volume and timing, as it builds up increased milk supplies in advance of the new cheese facility going operational at the end of 2012.

In addition, Milk Link is currently following up over 255 enquiries from farmers based across the UK seeking further information on the benefits of supplying it. The recruitment campaign relates to Milk Link’s major £20 million investment to transform its Lockerbie Creamery which, when complete, will enhance both its capacity and capabilities and make it the largest dairy processing facility in Scotland. The site will benefit from a major redevelopment with the installation of the latest processing technology increasing annualised production by 12,000 tonnes to over 37,000 tonnes of cheese per annum.

Milk Link, the UK’s largest cheese maker owned by over 1,600 dairy farmers, is to invest £20 million to transform its Lockerbie Creamery in Scotland, enhancing both its capacity and capabilities and making it one of the UK’s leading Cheddar production facilities. The investment will make Lockerbie the biggest dairy processing facility in Scotland and one of the largest and most advanced creameries in the UK. The site will benefit from a major redevelopment with the installation of the latest processing technology increasing annualised production by 12,000 tonnes to over 37,000 tonnes of cheese per annum.

The major investment being made at Lockerbie will not only secure the long term future of the creamery but also help to provide a strong platform for the expansion of dairying in South West Scotland and the North of England. In line with the new creamery’s increased processing capacity, Milk Link will now be actively recruiting additional Members in Scotland and the North of England to supply Lockerbie.

The investment will enhance Lockerbie’s product consistency and productivity. It will complement Milk Link’s other major Cheddar creameries – Taw Valley in Devon and Llandyrnog in North Wales – and enable the business to meet the growing demand from leading retailers, food service businesses, food processors and export customers for its high quality range of customer label and branded cheeses, butters and dairy ingredients.

“Our investment at Lockerbie will transform the creamery and reinforce Milk Link’s leadership position in the production of high quality British cheeses,” says Neil Kennedy (pictured), chief executive of Milk Link. “At the same time, we believe it provides a timely boost to the dairying sector in South West Scotland and the North of England as we increase the volume of milk from the region going into value added dairy processing.”

He continues: “The capital investment programme will be the largest undertaken to date by Milk Link and indeed is one of the largest investment projects in cheese manufacturing seen over the last 20 years in the UK.”

It follows on from Milk Link’s major investments at TawValley in relation to a next generation whey processing plant and the building of a new soft cheese creamery at Cornish Country Larder’s Trevarrian site, both of which will be fully operational this Autumn. Work at Lockerbie will start later this year and will be completed by Autumn 2012.

Italian dairy company Granarolo has strengthened its cheese business with the acquisition of Lat Bri for an undisclosed sum. With an annual turnover of about Eur150m, Lat Bri is the third biggest fresh cheese maker in Italy. The acquisition will double the scale of Granarolo’s cheese sales and increase its export business.

“The acquisition of Lat Bri is of strong strategic importance,” points out Gianpiero Calzolari, chairman of Granarolo. “It lays the foundation for further development in the dairy sector inItalyand makes Granarolo the second national operator in this sector. Abroad, we will develop synergies by taking products made inItalyto European consumers, especially in northernEurope, where Lat Bri has long had a widespread market presence.”

Granarolo currently operates five production facilities spread across Italy, employs 2,000 people and achieved a turnover of Eur884 million last year.

Despite uncertain conditions arising from geopolitical unrest in Africa and the Middle East, Bel Group increased sales by 4.7% to Eur1.22 billion in the first half of 2011. However, operating income at the French branded cheese producer declined by 35.5% to Eur90 million, impacted by sharp rise in raw material prices and the international geopolitical environment.

The increase in raw material prices also weighed on working capital requirement and led to net financial debt of Eur312 million at June 30th 2011, up from December 31st 2010. However, net financial debt represented 31% of consolidated equity at 30th June 2011, versus 35% at 30th June 2010. The group’s balance sheet thus remains very healthy.

Bel Group does not anticipate any improvement in market conditions in the second half of 2011, with raw material prices expected to remain high, economic and financial conditions likely to stay very turbulent and an unpredictable geopolitical situation. Against this unfavorable backdrop, the group will continue in its efforts to ensure volume growth, defend market share, further its policy of selective price increases, and strengthen plans to improve operating performance.

The group does not expect to see a recovery in operating margin in the second half of 2011 and anticipates a decline for the full year versus 2010.

Bel Group’s portfolio of cheeses includes international brands such as The Laughing Cow, Kiri, Mini Babybel, Leerdammer, and Boursin, as well as some 20 local brands. Bel Gtoup employs 11,300 people in some 30 subsidiaries around the world and operates 26 production sites.

Buoyed by strong global dairy markets, good demand in key nutritional sectors and first time contributions from acquisitions, Glanbia, the Irish and international nutritional solutions and cheese group, has increased EBITA pre exceptional by 43.6% to Eur121.6 million on a constant currency basis for the six months ended July 2nd 2011. Total group revenue grew by 33.4% to Eur1.64 billion. Group EBITA margin pre exceptional improved by 50 basis points to 7.6%.

Glanbia’s largest business segment by revenue is Dairy Ireland, which represents 43.1% of total group sales and 28.8% of EBITA pre exceptional. The US Cheese & Global Nutritionals business contributed 41.2% of Glanbia’s revenue and is the largest division by EBITA accounting for 57.9% of the total in the first half.

John Moloney, group managing director of Glanbia.

DairyIreland performed strongly in the first half of 2011 relative to the prior year, with revenue rising 30% to Eur705.6 million. Strong commodity prices and higher volumes underpinned a 63.6% increase in EBITA pre exceptional to Eur35.0 million.

US Cheese & Global Nutritionals also delivered a strong performance in the first six months of 2011, increasing revenue by 37.4% to Eur674.0 million. EBITA pre exceptional grew 34.1% to Eur70.4 million, mainly due to growing demand across all key nutritional markets and product categories.

“We have had an excellent first half delivering adjusted earnings per share growth of 55%, on a constant currency basis. Global dairy markets were strong as growth in dairy consumption in developing regions underpinned sustained demand and higher prices.US dairy markets were also significantly higher relative to the first half of last year,” says John Moloney, group managing director of Glanbia.

He continues: “Glanbia continues to perform well. The overall trading environment remains positive and while global dairy market prices appear to have peaked in the current cycle, indications are for a relatively modest softening in prices for the remainder of the year. Demand-led growth across all product categories in Global Nutritionals is also strong. The calibre of our first half performance, leading market positions and strength of our global portfolio, positions Glanbia strongly for the full year. We are upgrading our 2011 guidance to 18% to 20% growth in adjusted earnings per share, on a constant currency basis.”

The UK Office of Fair Trading is imposing fines totalling £49.51 million on four supermarkets and five dairy processors, following its dairy products retail pricing investigation. The OFT found that Arla Foods UK, Asda, Dairy Crest, McLelland, Safeway, Sainsbury, Tesco, The Cheese Company and Robert Wiseman Dairies infringed the Competition Act 1998 by co-ordinating increases in the prices consumers paid for certain dairy products in 2002 and/or 2003.

This co-ordination was achieved by supermarkets indirectly exchanging retail pricing intentions with each other via the dairy processors – so called A-B-C information exchanges.

The OFT found that three infringements were committed. Not all companies were involved in all three infringements.

The first infringement related to cheese in 2002 and involved Asda, Dairy Crest, Lactalis McLelland (prior to its acquisition by Groupe Lactalis), Safeway (prior to its acquisition by Morrisons), Sainsbury, Tesco and The Cheese Company.

The second infringement also related to cheese but for 2003 and involved Asda, Lactalis McLelland (prior to its acquisition by Groupe Lactalis), Sainsbury’ and Tesco.

The third infringement concerned fresh liquid milk in 2003 and the parties involved were Arla, Asda, Dairy Crest, Safeway (prior to its acquisition by Morrisons), Sainsbury and Wiseman.

Arla benefitted from complete immunity from fines as it applied for and was granted immunity under the OFT’s leniency programme. Arla was the first company to alert the OFT to the existence of possible infringements and the first to apply for leniency.

Asda, Dairy Crest, McLelland, Safeway, Sainsbury’s, The Cheese Company and Wiseman received reductions in their fines because they agreed to early resolution. Each of these parties admitted liability for the infringements and agreed to a streamlined procedure enabling parts of the case to be resolved more quickly, thus reducing the costs of the investigation.

“This decision sends a strong signal to supermarkets, suppliers and other businesses that the OFT will take action and impose significant fines where it uncovers anti-competitive behaviour aimed at increasing the prices paid by consumers,” says John Fingleton, chief executive of the OFT. “Competition in the supermarket sector is generally intense and has delivered significant benefits to shoppers across the UK in terms of innovation, choice and improved value for money. Our investigation and this final decision will help ensure that this competition is maintained.”

Although turnover slipped by 2% to £1.61b for year ended March 31st 2011, Dairy Crest managed to increase adjusted profit before tax by 5% to £87.6m in challenging trading conditions. Profit before tax remained static at £77.8m.

In line with its development strategy, the UK dairy group again increased added value sales and its five key brands all performed well. The dairy group also grew sales of milk to major retailers during the year and started to supply liquid milk to Tesco.

Dairy Crest delivered £20m of annualised cost reduction initiatives during the year and has identified a further £20m for 2011/12.

“Dairy Crest’s results for the year demonstrate the benefit of being a broadly based business. A strong performance from our branded spreads and cheese businesses has more than offset tougher trading in dairies,” remarks Mark Allen (pictured), chief executive of Dairy Crest. “We have also been successful in making cost savings across the business to reduce the effect that commodity inflation is having on our customers and consumers, and have lowered net debt again this year.”

He adds: “Against a background of higher input costs and increasingly cash-constrained consumers we will continue to focus on doing the right things for long-term benefit, including making efficiency improvements and investing in the long-term health of our brands and facilities. We are soundly positioned to deal with the challenges ahead.”

French dairy group Lactalis, which already owns 29% of Parmalat, has made a Eur3.38b offer for the remaining shares in the Italian food group. The move is sure to raise opposition in Italian political circles where Parmalat is viewed as a national asset and is the country’s biggest listed food company.

Lactalis is the world’s largest cheese producer and the third largest dairy group behind Nestle and Danone. Privately owned by the Besnier family, Parmalat had a turnover of Eur9.4b in 2010, with 60% generated outside of France where the group has a presence in over 140 countries. It already owns Galbani, Italy’s leading cheese producer, but had a recent Eur1.4b bid for French yoghurt group Yoplait rejected..

Parmalat’s revenue last year was about Eur4.3b and it is present in 16 countries. Its chief brands are Parmalat for UHT milk and dairy products and Santai fruit beverages.

UK dairy co-operative Milk Link has commenced work on the first phase of a new production facility at its Cornish Country Larder Trevarrian Creamery in North Cornwall. The £4m investment will substantially increase production of the Trevarrian Creamery’s award-winning soft cheeses to meet a growing demand from major retailers and food service providers nationwide.

Cornish Country Larder, a leading producer of British speciality soft cheeses, was acquired by Milk Link in January this year, as part of a deal to strengthen its position as the foremost producer of British cheeses.

The new development at Trevarrian will result in increased production and maturation capacity for the creamery’s comprehensive range of soft cheeses including Cornish Brie, Camembert and brands such as Gevrik soft goat’s cheese and St Endellion (a luxury Cornish Brie, made using Cornish double cream). It will feature ‘best in class’ processing technology to improve product quality and consistency whilst retaining all the authentic quality and taste of the cheeses for which Cornish Country Larder is famous.

The first phase of the Trevarrian development will be completed by the Autumn of 2011.

Arla Foods is to rationalise its yellow cheese production to counter international competition and declining milk volumes in Sweden. The Scandinavian dairy group’s restructuring plan aims at consolidating part of the yellow cheese production at its plants at Nr Vium and Taulov in Denmark, which will be significantly upgraded. The investment will have implications for Sweden’s Falkenberg Dairy and possibly the Danish Klovborg and Hjorring dairies.

As a result of the tough competition in international markets for yellow cheese, Arla’s board of directors has approved a DKr615m (Eur82m) investment in the dairies at Nr Vium and Taulov. The Swedish dairy at Falkenberg will be closed and it is expected that two Danish dairies at Klovborg and Hjorring will also eventually be shut. The measures are designed to secure Arla’s future production of a broad range of yellow cheeses at competitive prices.

“Market conditions are tough and if we don’t act now even more jobs will be lost within a few years,” explains Jais Valeur, executive vice president of Arla Foods. “Of course, it’s sad for the many colleagues who may lose their jobs but we hope that we’ll be able to maintain other jobs at Arla’s dairies going forward. An added benefit is that we’ll be able to use Swedish milk more efficiently – for the benefit of both milk producers and consumers.”

Milk volumes have been declining in Sweden since 2003 and to avoid empty plants, Arla has to react to the over capacity problem at its Swedish dairies, which has contributed to increased production costs. To keep costs under control and maximise the milk price paid to the co-operative owners, Falkenberg dairy is being closed.

Falkenberg’s cheese production will be transferred to the Danish dairy in Nr Vium, which will benefit from an expansion programme amounting to DKr125m over the next twelve months.

Over a three period, Arla will expand the dairy in Taulov. With the planned investment, the Taulov dairy will reach production of up to 45,000 tonnes of cheese per year. This will increase the capacity at the dairy by more than 60%. At the same time the capacity at Nr Vium will go up to 59,000 tonnes, which is equivalent to a 34% increase, allowing Arla to produce cheese at lower costs and improving its international competitiveness.

”These changes will create a sound future for Arla’s yellow cheese production,” says Jais Valeur. “Around 25% of Arla’s milk is currently used for cheese-making so this is an important business area for us which we will have to develop – and be competitive in.”

Reduced margins at its DPI US speciality food business were behind a sharp drop in EBITA by a third to Eur26.9m, despite a 6% rise in turnover to Eur1.9b in 2010 at the Irish Dairy Board. The consumer food division, which encompasses the Kerrygold butter and Pilgrim’s Choice cheese brands in the UK, increased sales by 38% to Eur747.3m.

Sales at the commercial and ingredients division rose by 7.7% to Eur468m, while sales at DPI in the US were Eur710m,

“Overall the business reported a satisfactory performance in 2010, with the exception of our DPI, where margins, in common with the broader market, contracted sharply,” says Kevin Lane, chief executive of the Irish Dairy Board. “Last year was a transitional one for the business and one which saw the IDB develop its strategic growth plans to re-position the business for the future.”

He adds: “In 2010 we have taken major steps on our journey to transform the business and are committed to having a world class business that will deliver excellent results.” The IDB will pay out of Eur11.7m to its member co-operatives.

Dairy Crest is planning a further £20m cost reduction programme for its next financial year to help offset increasing input costs. The UK dairy group’s cost reduction programme in its last financial year ended March 31st 2011 delivered annual savings ahead of the £20 million target set at the start of the year.

Input costs have increased steadily during the past year and Dairy Crest is forecasting that this trend will continue. However, the group says that it is making satisfactory progress in recovering the balance of currently envisaged higher costs from customers.

In its pre-close update, Dairy Crest reports that trading in its fourth quarter has remained strong and profit before tax for the year ending March 31st 2011 remains in line with expectations. The group is continuing to benefit from being a broadly based business, with a strong performance from the cheese business compensating for more challenging trading in Dairy Crest’s spreads and dairies businesses.

Dairy Crest’s strategy is to grow sales of its brands and other added value products, control costs and generate cash. All five of its key brands increased sales during the year.

Dairy Crest also sold more milk to the major supermarkets and won an important contract to supply Tesco during the last financial year. However, Dairy Crest was unable to agree a suitable milk price with the Co-operative Group and its fresh milk supply contract to the retailer will end in August 2011.

“This has been a year of strong progress for Dairy Crest in which we have consistently delivered on our strategy despite challenging trading conditions. We are well positioned with strong brands, tight cost control and an efficient supply chain,” says Mark Allen (pictured), chief executive of Dairy Crest. Dairy Crest will announce its preliminary results for the year ending March 2011 on May 19th 2011.

Dutch dairy co-operative Royal FrieslandCampina increased net revenue by 10% to Eur8.97b and profit by 57% to Eur285m during its 2011 financial year as it benefited from more favourable market conditions, particularly in Asia and Africa. However, in Europe declining dairy consumption put pressure on volume.

FrieslandCampina’s Ingredients and Consumer Products International business groups made a strong contribution to the increase in revenue and operating profit. Cheese & Butter saw an improvement in operating profit. Thanks to FrieslandCampina’s good results and the higher guaranteed price, the milk price its the member dairy farmers, which fell in 2009, increased by 25% in 2010.

The net revenue of the Consumer Products International business group (Asia, Africa, the Middle East and exports) jumped 20.3% to Eur2.28b, due to a combination of volume growth, price rises and currency effects. The net revenue of Consumer Products Europe rose by 1.5% to Eur3.27b. Although growth was achieved in Russia, in most other markets volumes were lower and prices were under pressure due to increased promotional support. Despite the difficult market conditions, the market share of most of the brands was expanded or maintained.

Cees ‘t Hart, chief executive of Royal FrieslandCampina.

Cheese & Butter’s net revenue grew by 7.3% to Eur2.35b, reflecting higher prices for both products and increasing exports of cheese. The volume of cheese produced and sold was lower, partly due to the sale of the Bleskensgraaf cheese factory, but this was offset by the higher cheese and butter prices.

The net revenue of the Ingredients division rose by 37% to Eur2.06b helped by higher income from special ingredients for the food industry, such as milk powder and caseinates.

“The year 2010 ended with a good result. The market share of most brands were improved or maintained. Volumes rose. Both the revenue and the operating profit increased in line with our ambition to grow and create value,” says Cees ‘t Hart, chief executive of Royal FrieslandCampina. “In 2010 the merger between Friesland Foods and Campina which started at the end of 2008 was completed. There is a clear focus on growth, further professionalisation of the organisation and co-operation. Our market focus and efficiency have improved, so that FrieslandCampina is now ahead of schedule in realising its synergy objectives.”

During 2011, FrieslandCampina will continue to follow its ‘route2020’ development strategy, which aims for growth in dairy based beverages, baby and infant food, branded cheeses and specialised ingredients. Investments are planned to expand production capacity and to improve efficiency and innovation.

Dairy co-operatives Arla Foods of Scandinavia and Hansa-Milch Mecklenburg-Holstein of Germany are set to merge. A merger plan put forward by the boards of the two companies has now been approved by the members of the two co-operatives. The decision is being implemented with retrospective effect for the full 2011 financial year, and is enacted for January 1st 2011. The merger is not unexpected as both companies have already been co-operating successfully for many years.

Owned by 7,200 farmers in Denmark and Sweden, Arla Foods is the world’s fourth largest dairy group and operates successfully in both domestic and international markets. It is well known for its speciality cheeses such as BUKO, Castello and Hohlenkase, and for Lurpak butter. Owned by 1,200 dairy farmers, Hansa-Milch has enjoyed sustained success in northern Germany, and with its Hansano brand is one of the main providers of regionally-produced fresh dairy products such as milk, cream and quark.

The dairy business of Hansa-Milch, until now owned by the Hansa-Milch co-operative, will transfer to the ownership of Arla Foods under the merger arrangements. Manfred Remus, chairman of Hansa-Milch, who developed the merger plans together with the executive boards at Hansa-Milch and Arla Foods, will continue to head up the company with his team. In addition, consideration will be given in the coming months to the possibilities of expanding the Hansa-Milch plant in Upahl.

Hansa-Milch will now be known as Hansa Arla Milch. It remains a co-operative entity with its own members, and joins Arla Foods in that capacity. This means that the democratic structures are still preserved under the new entity of Hansa Arla Milch. In addition, the northern German dairy co-operative will have its own representatives on the boards and committees at Arla Foods.

Peder Tuborgh, chief executive of Arla Foods.

Under the merger of the two co-operatives, the Hansa Arla Milch farmers are being given a milk purchase guarantee from Arla Foods with no time restriction. In addition, Arla is assuring Hansa-Milch of a milk payment price calculated on the same basis as is used for its Danish and Swedish members.

“In previous years, the price we paid for milk was generally higher than that given by Hansa-Milch. This means that Hansa Arla Milch members can expect a higher price in future,” points out Peder Tuborgh, chief executive of Arla Foods.

The Arla Foods strategy includes paying members the highest possible milk price. “To achieve this objective, we need to continue to grow in Europe, and particularly in the important German market,” explains Peder Tuborgh. “Together with Hansa Arla Milch, our aim is to be one of the top three German dairy companies.”

The merger still has to be approved by from the competition authorities.

Buoyed by improved global dairy markets and good demand in key nutritionals sectors, Glanbia, the global nutritional solutions and cheese group, increased total revenue by 21.4% to Eur2.6b and EBITA, before exceptionals, by 21.6% to Eur173.2m for the year ended January 1st 2011. The improvement in performance was driven by the return to profit of Glanbia’s Dairy Ingredients Ireland business, after a first time loss in 2009, as its strategic cost management programmes in Ireland yielded targeted annualised savings.

Revenue in US Cheese & Global Nutritionals was up 29.0% to Eur1.0b and revenue in Dairy Ireland grew 10.7% to Eur1.1b. Revenue from joint ventures and associates grew 40.0% to Eur416.6m.

Dairy Ireland improved EBITA pre exceptional by 74.2% to Eur47.9m. US Cheese & Global Nutritionals delivered reasonable year-on-year EBITA pre exceptional growth, underpinned in particular by a good performance by Global Nutritionals. US Cheese & Global Nutritionals EBITA pre exceptional grew 4.2% to Eur104.5m. Group EBITA margin pre exceptional grew 20 basis points to 7.0%.

John Moloney, group managing director of Glanbia.

“Glanbia had an excellent year with results ahead of expectations,” says John Moloney, group managing director of Glanbia. “The group benefited from strong organic revenue growth in our three nutritionals businesses, a return to profitability in Dairy Ingredients Ireland and the delivery of our strategic cost reduction programmes in Ireland. We delivered strong revenue and earnings growth and our 2010 performance reflects the strength and diversity of our businesses.”

He continues: “The group is well positioned for 2011. Our current expectation is that the trading environment for 2011 will be broadly positive. Global dairy markets are expected to remain firm, underpinned by robust demand, particularly from Asia, and demand-led growth in key nutritionals sectors. In January we acquired BSN, a leading US sports nutrition business which is an excellent strategic fit with our Performance Nutrition business. For 2011, given our strong market positions and growing portfolio, we are forecasting 11% to 13% growth in adjusted earnings per share, on a constant currency basis.”

First Milk, the largest dairy farmer-owned business in the UK, has set up a strategic alliance with Eilers and Wheeler, one of Europe’s most established suppliers of dairy products. Under the new arrangement, Eilers and Wheeler will be First Milk’s preferred partner for export sales of cheese and packet butter.

“Currently world markets are providing strong margins for UK dairy products and with most commentators predicting that global demand will continue, we recognised that we needed an experienced partner to drive our export sales,” explains Kate Allum, chief executive of First Milk. “Eilers and Wheeler has been particularly interested in the export potential of our products and brands, including the Lake District cheese company. We have agreed to move a growing percentage of our cheese make through this route and will evaluate progress on an ongoing basis.”

Despite the difficult trading environment, Swiss dairy group Emmi achieved sales slightly higher than expected due largely to the strong performance of its latest acquisitions and encouraging international growth. The group net profit margin for 2010 is expected to be slightly over 3%.

Emmi generated net sales of SFr2.68b (Eur2.1b) in 2010, an increase of 2.5% on the previous year. When adjusted for the effects of acquisitions and currencies, organic growth was 1.3%.

Net sales in Switzerland rose by 0.4% to SFr1.95b as strong performances by brands including Emmi Caffe Latte, Kaltbach and Luzerner, coupled with the acquisitions of Fromalp and Nutrifrais offset the fall in prices resulting from lower milk prices and the loss of a major customer in the course of 2009.

Emmi achieved an 8.4% increase in net sales in international markets to SFr732m. This was chiefly due to the encouraging performance of Emmi Roth USA, growing exports of cheese and Emmi Caffe Latte, the collaboration with Venchiaredo and the expansion of the Trentinalatte brand in Italy, and the acquisition of Fromalp. A more positive consumer sentiment in Emmi’s key markets helped to cushion the effects of the strength of the Swiss franc. In local currencies and adjusted for acquisitions, international growth of 9.4% was achieved.

“The results show that we are on track with our strategy. The focus on major key markets and the strengthening of successful brand platforms are showing the expected positive effects,” says Urs Riedener, chief executive of Emmi.

Raw milk prices are expected to remain at the prior-year level in the first half of 2011, while prices for other raw materials (coffee, fruit and cereals) and packaging costs are likely to rise. Emmi expects consumer sentiment to remain stable in its two most important foreign markets, namely Germany and the US. The strength of the Swiss franc will result in further price rises. The effect of these on the customer demand, especially for cheese, remains a risk.

AB Holdings, which is one of Turkey’s largest food groups, is to build a new dairy products factory in Konya in the centre of the country, through its subsidiary Panagro. Construction of the new dairy, which will serve the Turkish and neighbouring markets, is scheduled to begin in early 2011.

The dairy is being designed by SPX, the provider of engineering, manufacturing and system solutions for the global food processing industry, under a $15m contract. The new dairy is expected to produce yoghurt and ayran (drinking yoghurt), as well as double cream cheese, cheddar, kashkaval and feta cheese, butter, milk produced with ultra-high temperature processes, demineralised whey, skimmed milk powders and fruit juices.

Plans include multiple solutions from SPX’s broad portfolio of branded processing technologies and solutions. Technologies include APV-branded automated thermal milk processing, fresh dairy processes, membrane and CIP (clean in place) technologies; Gerstenberg Schroder butter-making equipment; and Anhydro tubular evaporation and spray drying technologies.

The Panagro dairy will be designed from the ground up to be vertically integrated in a combined operation that includes an adjacent cattle farm and meat production facility.

“Nearly 30% of Turkey’s population of 70 million people are under the age of 30, and this is the highest percentage of young people among all European countries,” says Baydu Veznedaroglu, chief executive of AB Holdings. “To feed these children and young people with healthy foods, we should increase the number of dairy and meat plant investments in Turkey. Our country is also becoming a leading exporter of dairy products to the Middle East, and this dairy will play an instrumental role in our company’s plans for this region.”

New guiding principles on country of origin labelling to provide British consumers with clear, accurate information on the origin of their food have been published. The guidance, titled ‘Principles on Country of Origin Information’, has been developed by retailers’ organisation, the British Retail Consortium (BRC), in association with representatives of food manufacturers, commercial caterers and the hospitality trade.

Based on the labelling practices of the best performers in the food chain, it aims to bring others into line to ensure a higher quality and consistency of origin – information everywhere that consumers buy food.

The Principles apply to meat, processed meat products (sausages, bacon, ham etc) and milk, fresh cream, cheese and butter. They have been devised to ensure that the term ‘British’ can only be used for meat from animals born and reared in the UK, and dairy products made from milk produced here. Many British grocers already use this approach to origin labelling, with the overwhelming majority committed to going one step further, providing country of origin information on the meat in all ‘composite’ products – such as soups and ready meals.

“This guidance formalises an approach to country of origin labelling which Britain’s large retailers have already agreed. In fact, many grocers already go well beyond the high minimum standards set out in the document,” points out Andrew Opie, food director of British Retail Consortium. “We have taken leadership on this issue because we believe it’s important that all elements of the supply chain, from food processors and restaurants, right through to the catering firms working for Government and councils, give consumers the information they need to make informed decisions. Supermarkets are making it easy for those shoppers who want to buy British to do so. Other food service providers need to up their game.”

Swiss dairy company Emmi has completed the extension of its cheese-ageing cave in Kalthbach in response to growing demand for Kaltbach cheese specialities in Switzerland and abroad. Over the last two years the facility has been extended by 1,300 metres. Some 1,800 tonnes of Kaltbach cheese were sold in 2009 with 38% on the home market and the balance exported. Demand for Kaltbach specialities has risen continuously in recent years, primarily in the US, the Netherlands, Germany and the UK, but also in Asia, South Africa and Russia.

Kraft Foods has opened a European Gum and Candy Research & Development Centre at Eysins in Switzerland. The $14m state-of-the-art facility will focus on innovation and new product development for many of Kraft Foods’ confectionery brands, including the world’s leading gum brand Trident and the world’s leading candy brand Halls, as well as other brands like Bassetts, Carambar, The Natural Confectionery Co, Trebor and V6.

Worth $23 billion annually, the global gum market has grown by almost a quarter since 2005, and is one of the fastest-growing categories within confectionery. Kraft Foods has a number of gum brands with leading positions in markets across Europe, such as Hollywood in France, Trident in Spain, Greece and Portugal, and Stimorol in Denmark and Switzerland.

The new centre will be home to a team of product and package developers and quality experts who are responsible for breakthrough gum and candy innovation, such as the new Fresh & Clean gum product which is currently launching in markets across Europe. As the European Centre for innovation and technology for gum and candy, the team based in Eysins will collaborate closely with the Kraft Foods Global Gum & Candy Centre of Excellence, based in New Jersey in the US, to drive innovation and new technologies that support the company’s European gum and candy business and global category growth platforms.

The Center in Eysins joins 14 other Kraft Foods R&D Centres supporting the company’s global businesses including beverages, biscuits, cheese, chocolate, coffee and gum and candy.

UK exports of food and non-alcoholic drinks grew to more than £5b in the first half of 2010 – a rise of 4.3% on the same period in 2009 – and full-year sales to overseas markets are forecast to break the £10 b barrier for the first time, according to figures released by the Food and Drink Federation.

This first half growth has been characterised by an almost entirely flat EU export market but buoyant growth to non EU markets, which increased by 23.1% from £927.6m to £1.14b. All non-EU markets showed growth, but particularly strong markets included North America, up 34.9%, Asia up 34.6%, Latin America up 20.8% and the Middle East, up 20.0%. The fastest growing export market for UK food and drink is Hong Kong, which was up 49.3%.

Dairy proved to be the strongest sector, driven by a 15.2% growth in cheese exports.

Looking at the performance of individual sectors, dairy proved to be the strongest sector, showing growth of 21.3% to £464.3m, driven by a 15.2% growth in cheese exports, especially cheddar and blue cheeses. This in direct contrast with 2009, when dairy was the worst performing sector. Fish and seafood also performed well, growing 7.1% to £575.7m, including a 22.3% rise in fresh salmon export sales, which now account for 65% of fresh fish exports. Within the prepared foods sector, both sauces & condiments and jams & preserves performed well, growing by 10.6% to £98m and 9% to £16m respectively.

“I am delighted to see another strong export performance from UK food and drink manufacturers,” says Melanie Leech, director general of the Food and Drink Federation. “If these levels continue throughout 2010, we should see our sixth consecutive full year of growth and break the £10 billion mark for exports for the first time.”

The UK food and drink industry directly employs 440,000 people; generates £73b of turnover and value added of £21.6b; and accounts for 15% of total manufacturing output. The export figures further highlight the sector’s importance to the UK economy.

Global ingredients, flavours and consumer foods manufacturer Kerry Group has had its Eur33m offer for Newmarket Co-operative Creameries, the Irish cheese producer, accepted. Located in North Cork, Newmarket Co-operative has an annual manufacturing capacity in excess of 35,000 tonnes, and is a major supplier of cheese to Kerry Group’s branded cheese business. Completion of the transaction is subject to approval by the Competition Authority of Ireland.

The first UK sector specific guidance for calculating the carbon footprint of all dairy products has been launched. Developed by Dairy UK, DairyCo and the Carbon Trust in collaboration with industry, the guidelines will be used by dairy processing companies to help them measure carbon emissions across their supply chain. As well as ensuring a consistent industry-wide approach to carbon footprinting the guidelines are designed to help those involved at every stage of production to understand the importance of carbon footprint measurement and explain how it is done in a clear and accessible way.

“Dairy products such as milk, cheese and yoghurt are found in the homes and shopping baskets of most UK consumers, so by working to reduce their carbon impact we can make a real difference,” says Euan Murray, head of footprinting at the Carbon Trust. “We are pleased to have helped Dairy UK and DairyCo develop sector specific guidance on carbon footprinting.”

Ukrainian dairy business Ukrproduct Group has reported a 5.3% drop in year-on-year revenue to £20.7m for the first six months ended June 30th 2010, although the figure remained stable in local currency, and gross profit dropped 18% to £3.2m as price sensitive consumers moved down market. Gross profit from branded dairy products, which account for two-thirds of total revenue, fell 42%.

“During the first half of 2010 Ukrproduct has witnessed a further decrease in the purchasing power of the local population, which resulted in a continued switch in consumer preferences from the middle to the mass market segment. At the same time growth in input prices outpaced the rise in consumer prices,” says Sergey Evlanchik, chief executive of Ukrproduct. “Domestic processed cheese prices have declined by 15% on average from January 2010 and have reached July 2009 levels, driven by aggressive pricing by local producers at the low end of the market. Prices for packaged butter were up by 25% year-on-year on average which has partially compensated for the increased cost of raw materials.”

The French Competition Commission has approved dairy group Sodiaal’s acquisition of Entremont Alliance, the loss making French cheese producer. The deal will create the fourth largest dairy group in Europe with combined annual sales of more than Eur4b and processing over 5b litres of milk annually. Sodiaal still needs approval from the Belgian and Italian competition authorities.

Sodiaal owns French milk brand Candia and also has a 50% stake in Yoplait, the international yoghurt brand. However, Sodiaal’s partner in Yoplait, private equity firm PAI Partners, is reported to be considering selling its 50% stake in French yoghurt producer. With sales of Eur3.8b and a gross operating profit of Eur120m in 2009, Yoplait is valued at Eur1-1.2b.Yoplait is sold worldwide through a franchise network.

Speculation is also mounting that Sodiaal may sell part of its shareholding in Yoplait to reduce debt following its acquisition of Entremont. A sale of Yoplait is likely to attract the interest of global food processors such as Nestle, Arla Foods and General Mills, which operates the Yoplait franchise in the US, along with a number of private equity companies.