Tag Archive | "Dairy Crest"

Milk Price to Increase from Dairy Crest


dairycrestlogoDairy Crest will release a 1ppl raise its milk price from 1 September 2016, meaning that the Davidstow core milk price will be 22.72ppl. The company ensures that it will remain one of the most competitive milk prices in the United Kingdom.

“We are increasing our milk price against a backdrop of falling UK milk production. Dairy Crest wanted to reflect this in our milk price as soon as possible,” said Ruth Askew, Head of Procurement at Dairy Crest. “We are proud that the Davidstow contract has remained one of the most competitive milk prices in the UK throughout extreme downward pressure on the supply chain. We hope that this positive news will provide our farmers with some confidence as we head into the Autumn.”

“We are confident our business strategy is creating exciting opportunities to add value to milk produced by British farmers, such as our move into production of Infant Formula ingredients. The strength of our portfolio of market-leading brands, including Cathedral City, in addition to our new product streams, ensures we offer a secure, sustainable and growing partnership model for our supplying farmers.”

The Dairy Crest brand was created in 1980. The company is integrated dairy business. In 2015, the company sold its dairies business to Muller.

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Catastrophic Cuts Threaten UK Dairy Industry


The NFU (National Farmers Union) has strongly condemned the latest round of milk price cuts after three major dairy processors, who supply fresh liquid milk into the UK market place, issued notices for reductions. Robert Wiseman Dairies, Arla Foods UK and Dairy Crest have announced cuts to their milk prices paid to farmers of 1.7ppl, 2.0ppl and 1.65ppl respectively, following further significant cuts in recent months.

“This price slash comes at the expense of the average dairy farmer who is now making a significant loss for every litre they produce,” says NFU dairy board chairman Mansel Raymond. “Three processors will all cut their milk price on August 1; they all blame deterioration in commodity markets and cream prices – but none of them is taking responsibility for this dire situation.”

He continues: “For me, this just typifies everything that is wrong with this market place. It is time for liquid milk processors – and retailers and other major buyers – to take responsibility for this totally dysfunctional supply chain. It fails to address the one basic need of any business – the need to cover costs and make a profit.”

Mansel Raymond adds: “Until all retailers and processors commit to a fair and transparent supply chain, one that ensures a fair return for farmers, we will never break free from this vicious cycle of crisis after crisis in the dairy sector.”

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Dairy Crest to Sell St Hubert For €430 Million


Dairy Crest, the UK’s leading dairy foods company, has received a binding offer from Montagu Private Equity to acquire St Hubert, the French branded spreads business, for a cash consideration of Eur430 million (£3441 million).

The transaction follows Dairy Crest’s announcement in March 2012 of a strategic review of St Hubert. During the review a range of options were considered but as a result of substantial interest from a number of potential purchasers it was decided to pursue a divestment.

St Hubert was purchased in January 2007 for Eur370 million (approximately £248 million). Since its acquisition Dairy Crest has increased the revenue and EBIT for St Hubert by 35% and 45%, respectively.

St Hubert has been a successful part of the Dairy Crest group and has consistently increased its market share and profitability. However, Dairy Crest has been unable to make additional synergistic acquisitions in Continental Europe as it envisaged at the time of the acquisition and it believes that greater value may be generated for shareholders through the proposed disposal of St Hubert.

For the year ended 31 March 2012, St Hubert generated EBITDA of Eur48.1 million and EBIT of Eur46.1 million. The gross assets of St Hubert at 31 March 2012 were Eur169 million (£1413 million).

Following the disposal, Dairy Crest will remain a broadly based dairy business entirely focused on the UK with strong brands including CathedralCity, Country Life, Clover and Frijj. It intends to continue to build on the success of its UK branded foods business and restore its Dairies business to a satisfactory level of profitability in the medium term.

“Over the coming months, with a strengthened balance sheet, we will be able to consider a wide range of opportunities including synergistic acquisitions in the UK,” points out Mark Allen, chief executive of Dairy Crest. “This will allow us to employ the same brand-building skills that have contributed to the strong growth of our UK brands and St Hubert’s success. However, we will only do this within strict financial criteria and where an acquisition would add value for shareholders.”

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Dairies Business Behind Loss at Dairy Crest


Although revenue increased, due to strong growth in its Foods business, and group operating profits levels were maintained, UK dairy group Dairy Crest has reported a pre-tax loss of £10.1 million for the year ended 31 March 2012. Dairy Crest’s revenue rose by 2% to £1.63 billion during the year, with its Foods business growing sales by 10% supported by continued progress from its five key brands, which increased sales by 11%, boosted by a strong performance by Cathedral City cheese. However, revenue at the Dairies business fell by 2%.

Despite the challenging trading conditions, Dairy Crest managed to maintain adjusted profit before tax at £87.4 million but exceptional non-cash impairment charges in Dairies of £81.7 million resulted in a reported loss.

Mark Allen, chief executive of Dairy Crest, comments: “Dairy Crest’s results for the year demonstrate the continued benefit of being a broadly based business. Double digit growth in our branded Spreads and Cheese businesses has offset unsatisfactory results in Dairies. We have maintained adjusted group profits despite facing inflationary cost pressures of around £80 million this year by making annualised cost savings of around £22 million and achieving selling price increases. This has been made possible by a programme of consistent investment in developing our key brands and building a modern, efficient supply chain.”

Since the year end, Dairy Crest has announced a series of measures to restore its Dairies business to a satisfactory level of profitability in the medium term. In March 2012, Dairy Crest commenced a strategic review of its French spreads business, St Hubert, which is progressing.

Mark Allen adds: “In the current financial year, we are seeing continued strong momentum in our Foods businesses and we expect Dairies to benefit from the decisive action we are taking and our continued discipline on costs.”

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Dairy Crest to Close Two Liquid Milk Dairies


Dairy Crest is proposing to close two dairies as part of its long term plan to reduce costs and sustain profitability at its liquid milk business. Dairy Crest is entering into consultation with employees and their representatives on proposals to close two of the dairies at Aintree, Liverpool and Fenstanton, Cambridgeshire later this year. The proposed closures of these dairies has been facilitated by the ongoing £75 million investment programme in the Dairies business. This has driven efficiencies and increased capacity at the group’s other three polybottle dairies at Severnside, Gloucestershire, Chadwell Heath, London and Foston, Derbyshire.

Aintree is predominantly a glass-bottling dairy. There has been a fall in the sales of milk in glass bottles as residential sales continue to decline overall and customers increasingly opt for plastic bottles and milk bags. Dairy Crest will continue to supply residential customers with milk in glass bottles from its Hanworth dairy in London should Aintree close.

At Fenstanton, Dairy Crest packs milk into polybottles. Most of the volume here can be transferred to other, more highly invested Dairy Crest dairies.

Dairy Crest anticipates that there will be cash exceptional costs associated with these closures of around £15 million, to be charged in 2012/13. It will review the March 2012 carrying value of assets at these sites and goodwill in its Dairies business in the light of these proposals. Dairy Crest expects to treat all these charges, together with any required impairment of goodwill, as exceptional items.

Separately the Dairy Crest board has announced that its current contract to supply liquid milk to Tesco will not be renewed when it comes to an end in July 2012. Around 3% of Dairy Crest’s liquid milk sales in 2011/12 were made to Tesco. Despite the loss of this contract, Tesco remains a large and important customer for Dairy Crest’s key UK brands -CathedralCity, Country Life, Clover and Frijj.

The Dairy Crest board has also reported an improved year-end net debt position. Over the fourth quarter, Dairy Crest’s cash collection has been stronger than anticipated and its net debt at 31 March 2012 will be around 5% lower than market expectations.

“Dairy Crest is a broadly based business which has delivered against our strategy despite challenging trading conditions. Our Foods business has performed strongly and sales of our five key brands continue to grow. However, along with the rest of the sector, our Dairies business is under sustained pressure and we have to continue to act decisively to protect its future,” says Mark Allen, chief executive of Dairy Crest. “With lower net debts at the year end than we anticipated, the group has positioned itself well to absorb the cash costs associated with these closures.”

He continues: “The challenges in the liquid milk industry are further underlined by the disappointing loss of the Tesco liquid milk supply contract. However it represents just 3% of our total liquid milk volumes and has not driven the restructuring decisions.”

 

Dairy Crest will announce preliminary results for the year ended 31 March 2012 on 24 May 2012.

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Retail Squeeze Intensifies on UK Food and Drink Manufacturers


Within British manufacturing, particular pressure is being felt by companies that supply the embattled UK retail sector. Some of the worst affected companies are food, non-alcoholic beverages and clothing manufacturers, finds new research from Company Watch. Company Watch, the financial health monitoring specialists, analysed the published financial accounts of the largest 681 UK food, non-alcoholic beverage and clothing manufacturers. It found that 173 companies or 25% are currently in its Warning Area, with health ratings of 25 or below out of 100.

The Company Watch research showed that many retail manufacturers in the Warning Area, while having acceptable levels of profitability, had weak balance sheets that lacked the strength necessary to support their trading. This makes these companies particularly vulnerable if their profits dry up in the face of sector pressures for lower prices from their powerful retail customers at the same time that their input costs are rising.

A particular feature of balance sheets of retail manufacturers is the prevalence of intangible assets, usually goodwill from past acquisitions, which have limited appeal to funders such as banks, especially during difficult trading conditions.

Examples of lowly rated companies include Premier Foods, the owner of many famous food brands including Hovis, Mr Kipling and Oxo, which has a Company Watch H-Score of only 14 out of 100 and has been in the Warning Area consistently for the past five years.

Also, Dairy Crest, makers of Cathedral City cheese and the Utterly Butterly and Clover spreads, fell into the Warning Area after its March 2011 results with an H-Score of 20 and was pushed deeper when its interim figures to September 2011 produced a lower H–Score of 16.

Drinks manufacturer Britvic, owners of the Robinsons, Tango and 7Up brands, is another manufacturer which is in the Warning Area with a current H-Score of just 17/100, a financial rating partially driven by the high level of intangible assets which are almost 15 times the company’s net worth.

Nick Hood, head of external affairs at Company Watch, comments: “The accounts we examined are mainly for periods ending during the latter part of 2010 and early 2011, which means that these figures do not yet reflect fully the upward pressure on manufacturers costs from rising energy and commodity prices. Once these feed through, we can expect the financial health of the sector to deteriorate further, with more manufacturing companies falling into our Warning Area and becoming vulnerable to insolvency or restructuring.”

Statistics on all UK companies for the past 14 years show that one in four companies in this ‘red danger zone’ have either gone on to file for insolvency or have undergone a major financial restructuring.

The analysis is based on each company’s last five years published accounts as processed through the Company Watch “H-Score” risk assessment model. The average H-Score across the whole retail manufacturers sample was 52 out of a maximum 100.

Nick Hood continues: “Our survey highlights the problems facing retail suppliers. They, like the retailers themselves, are suffering a knock on effect from a fall in consumer confidence and reduced disposable incomes of shoppers. At a time when like-for-like sales are falling and consumers are demanding ever more value for money through deep discounts, retailers are inevitably making most suppliers share the pain.”

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Cost Reduction Programme on Track at Dairy Crest


Dairy Crest’s cost reduction programme is on track to deliver annual savings in line with the £20 million target set at the start of its financial year year. These savings have partially offset higher input costs including milk at the UK dairy group. Dairy Crest will continue to focus on reducing costs into the new financial year and expects to achieve a further similar level of annual savings.

Strong performances from Dairy Crest’s foods businesses are compensating for more challenging trading in its dairies division. However, despite the progress made in identifying and delivering efficiency savings, profits in the dairies business remain under pressure. Consequently, Dairy Crest is looking at a range of options to restore this business to a satisfactory level of profitability.

Dairy Crest’s strategy is to grow sales of its brands and other added value products, control costs and generate cash. Value sales of its five key brands (CathedralCity, Country Life, St Hubert Omega 3, Clover and Frijj) have increased during the financial year. Although sales volumes of these brands fell in the first half while Dairy Crest recovered higher input costs from its customers, a strong performance in the second half means that full year sales volumes will have increased compared to last year.

Dairy Crest will announce preliminary results for the year ending 31 March 2012 on 24 May 2012.

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Dairy Crest to Review its French Branded Spreads Business


Dairy Crest, the UK’s leading dairy foods company, is to commence a strategic review of St Hubert, its French branded spreads business. The review will evaluate all possible options available to Dairy Crest to maximise shareholder value, including a potential divestment of St Hubert.

Since its acquisition in January 2007, St Hubert has been a successful part of the Dairy Crest group and has consistently increased its market share and profitability. However, Dairy Crest has been unable to make additional synergistic acquisitions in Continental Europe as it envisaged at the time of its acquisition of St Hubert and it believes that greater value may be generated for shareholders through the consideration of all the available options for St Hubert.

A disposal would reduce Dairy Crest’s debt and provide it with a number of alternatives which include releasing some proceeds to shareholders, investing in its core business and making strategic acquisitions of branded businesses in the UK. This would further improve Dairy Crest’s strong position in the consolidating UK dairy market. Any acquisitions would be synergistic and made within strict financial criteria, as will any decision over the future of St Hubert.

Whatever the results of the review, Dairy Crest will continue to develop its broadly based UK business including its strong portfolio of brands (Cathedral City, Country Life, Clover and Frijj). The Dairy Crest board also intends to continue with its progressive dividend policy.

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Dairy Crest Left Chasing £4 Million Debt


Dairy Crest is increasing its bad debt provision by up to £4 million after a customer, Quadro Foods, called in administrators. According to the UK dairy group, this is the total debt owed to it by Quadra although Dairy Crest is looking at several options to reduce the amount involved.

Dairy Crest expects to treat any charge as an exceptional item in 2011/12 and as such it will not impact on its dividend considerations. Dairy Crest has annual sales of £1.6 billion and expects that this isolated incident will have no material effect on its year end borrowings.

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Dairy Crest Completes Debt Refinancing


Dairy Crest has successfully completed a debt refinancing by arranging a new bank facility that will mature in October 2016 and by raising additional debt private placement. In total, including existing debt private placement, theUKdairy group’s facilities will remain broadly unchanged at over £600 million.

 

A new five-year revolving credit facility of £170 million plus €150 million from a syndicate of five banks and £54.5 million ($85 million) of debt private placement will replace existing bank facilities of £340 million, consisting of £100 million that was due to mature in November 2011 and £85 million plus €175 million that was due to mature in July 2013.

 

Key financial covenants remain unchanged but margins have increased slightly, reflecting current market conditions. Mark Allen, chief executive of Dairy Crest, comments: “This delivers security of funding in the medium term which is important to us in today’s financial markets. We continue to reduce risk in our business.”

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Dairy Crest Meeting Expectations


Operational efficiencies and selling price increases have allowed Dairy Crest to broadly offset higher input costs during its first half trading period ending September 30th 2011. Trading has been in line with expectations and higher property profits will result in overall profits for the first half being slightly ahead of the same period last year.

 

The broad based UK dairy group is continuing with its successful strategy to build added value sales and make efficiency improvements across the business. Despite the pressure on consumers’ disposable incomes, sales of its five key brands (Cathedral City, Country Life, Clover, St Hubert Omega 3 and Frijj) in total have continued to increase, although volumes of these brands will be lower than in the same period last year.

 

Mark Allen, chief executive of Dairy Crest.

Innovation remains an important part of group strategy and Dairy Crest has completed the development of four exciting new products during the period. In the UK it has launched ‘Chedds’, a range of three new children’s cheese snacks and ‘The Incredible’, three new premium flavours for its branded milk shake Frijj. In France Dairy Crest has launched a newSt Hubert non-dairy cream and is about to launch a new spread that contains seeds.

 

Mark Allen, chief executive of Dairy Crest, comments: “In the first half our broad base, high quality brands and ongoing cost saving measures have allowed us to balance the conflicting demands of increased input costs and subdued consumer spending. At the same time we are investing for the future, with new products and upgraded facilities. Overall we remain confident of delivering full year profits in line with our expectations.”

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OFT Fines UK Supermarkets and Dairy Processors £50 Million


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.”

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Dairy Crest Strengthens Spreads Business


UK dairy group Dairy Crest has strengthened its spreads business with the £13m acquisition of MH Foods, which manufactures healthy ‘one calorie’ spray cooking oils and salad dressings. “It has a good history of innovation over many years, the leading brand in its sector and fits well with our Spreads business and we believe the acquisition will allow us to build on our strong portfolio of lighter brands,” says Mark Allen, chief executive of Dairy Crest.

Meanwhile, Dairy Crest has opened its environmentally friendly biomass boilers at its Davidstow creamery. The boilers constitute one of the largest sustainable wood pellet burning installations in the country and are of national importance in achieving carbon reduction. The biomass project will deliver a 12% reduction in Dairy Crest’s carbon emissions, a major step towards its ambitious commitment to the Carbon Trust to achieve 28% carbon reduction by 2020.

Dairy Crest’s overall trading in the first quarter of its current financial year has been in line with expectations. Total sales of its five key brands (Cathedral City, Country Life, Clover, St Hubert Omega 3 and Frijj) have increased by 5 % compared to the same period last year.

Dairy Crest also has a strong innovation pipeline, with several interesting new products due to be launched later this year. In the UK these include Chedds, a new children’s cheese snacks, and new premium flavours for its Frijj branded milk shake. In France, Dairy Crest will launch a new St Hubert non-dairy cream and a spread that contains edible seeds.

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Dairy Crest Eyes Yoghurt Market


UK dairy group Dairy Crest is reported to planning to move into the £1.2b yoghurt market either through developing its own business or by acquisition. Dairy Crest had been a key player within the UK yoghurt market through a joint venture with French dairy group Yoplait before selling its stake in 2009. A condition of the deal was that Dairy Crest would not compete in the yoghurt market for two years. That exclusion period expired in March.

“We want to develop a yoghurt business over time – that means developing a brand or going out and acquiring one,” says Mark Allen, chief executive of Dairy Crest. “In terms of our aspirations for the group, we are also looking at other businesses across our dairy categories.” Dairy Crest is involved in the cheese, liquid milk and spreads categories of the UK dairy market and also has a spreads business based in France.

According to Mark Allen, Dairy Crest could easily manage to pay £100m for the right acquisition without compromising its internal net debt targets.

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Dairy Crest Well Placed to Face Challenges Ahead


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.”

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UK Food and Grocery Industry Recovers 115,000 Tonnes of Waste


Participants in a scheme run by ECR (Efficient Consumer Response) UK are well on the way to achieving targets set last autumn to prevent and recover waste in the FMCG supply chain in the UK. By thinking differently about waste when looking at products, packaging design, range and forecasting, consumer goods manufacturers and retailers have prevented 38,000 tonnes of waste from being created in the first place and redirected a further 115,000 tonnes away from landfill and sewer.

In total, 33 leading food and grocery companies announced last autumn they are voluntarily committing to prevent 75,000 tonnes of waste being created by the end of 2012. All signatories are IGD members and leading retailers, manufacturers, wholesalers or food service operators. They have signed up to the target to totally remove this volume of waste from their supply chains.

Joanne Denney-Finch, chief executive of IGD.

The industry has made great strides in recovering waste, rather than disposing of it. To drive this progress even further the companies have pledged to meet an extra target. They have challenged themselves to divert a further 150,000 tonnes of waste from disposal, mainly from landfill and sewerage, to more productive outputs such as anaerobic digestion.

The food and drink manufacturers participating in the scheme include ABF, Bakkavor Group, Coca-Cola Enterprises, Dairy Crest, Gerber Juice Company, H J Heinz, Kraft Foods, Mars Chocolate UK, Molson Coors Brewing Company (UK), Muller Dairy (UK),

Nestle UK, Northern Foods, PepsiCo UK & Ireland, Robert Wiseman Dairies, Unilever UK, United Biscuits, VION Food UK and Warburtons.

“Food and grocery businesses are constantly striving to reduce waste from their operations and the majority of the supply chain’s product and packaging waste is now recycled or recovered, rather than disposed of,” points out Joanne Denney-Finch, chief executive of IGD. “IGD has brought the industry together to draw up, commit to and deliver these challenging targets – and the industry is making great progress.”

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Dairy Crest to Embark on Further £20 Million Cost Reduction Programme


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.

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Robert Wiseman Dairies Wins Milk Supply Contract


UK liquid milk specialist Robert Wiseman Dairies has won a new two-year contract to supply The Co-operative, the UK’s fifth biggest food retailer. Robert Wiseman Dairies currently supplies around 75% of The Co-operative’s own-brand conventional milk, with the remaining 25% supplied by Dairy Crest. Under the terms of the new dedicated supply agreement, from August 2011, Wiseman will take responsibility for 100% of the volume requirement of about 363m litres per annum.

By moving to dedicated supply, The Co-operative is committed to setting clear standards in animal welfare, minimising environmental impact and encouraging bio-diversity on the farms selected for the scheme.

Billy Keane, managing director of Robert Wiseman Dairies.

“We are very pleased to further extend our relationship with The Co-operative Group, and delighted that this important customer has taken the decision to set up a dedicated group of dairy farmers drawn from the Wiseman Milk Partnership who will benefit from a premium farm gate milk price,” says Billy Keane, managing director of Robert Wiseman Dairies. “We have invested heavily to create a network of dairies focused on fresh milk and worked hard to build a reputation for quality and service. We now look forward to working closely with The Co-operative Group over the next few months to put these new fresh milk supply arrangements in place.”

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UK Industry Responds as One in Three Shoppers Want Waste Reduction Prioritised


Nearly a third of UK shoppers want food and grocery retailers and manufacturers to focus on reducing waste. IGD consumer research shows 29% of shoppers think reducing waste should be one of the main sustainability priorities for the industry.

The findings come as 33 leading food and grocery companies have announced they are voluntarily committing to prevent 75,000 tonnes of waste being created by the end of 2012. All signatories are IGD members and leading retailers, manufacturers, wholesalers and food service operators. They have signed up to the target to totally remove this volume of waste from their supply chains.

The industry has made great strides in recovering waste, rather than disposing of it. To drive this progress even further the companies have pledged to meet an extra target. They have challenged themselves to divert a further 150,000 tonnes of waste from disposal, mainly from landfill and sewerage, to more productive outputs such as anaerobic digestion.

Joanne Denney-Finch, chief executive of IGD.

“Food and grocery businesses are striving continually to reduce waste from their operations. This has resulted in the majority of the product and packaging waste from their supply chain being recycled or recovered, rather than disposed of,” says Joanne Denney-Finch, chief executive of IGD. “The industry is now strengthening further its emphasis on supply chain waste prevention. This includes not producing the waste in the first place or redistributing it to alternative markets and charities, such as Fareshare.”

IGD members which have signed up to the two waste targets include: Associated British Foods, Bakkavor, Coca-Cola Enterprises, Dairy Crest, Gerber Juice Company, H J Heinz, Kraft Foods, Mars Chocolate UK, Molson Coors Brewing, Muller Dairy (UK), Nestle UK, Northern Foods, PepsiCo UK & Ireland, Robert Wiseman Dairies, Unilever UK, United Biscuits, VION Food UK and Warburtons.

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Solid First Half by Dairy Crest


Dairy Crest has performed solidly during the first six months of the year, benefiting from being a broadly based dairy business with strong brands. Adjusted profit before tax (before exceptional items, amortisation of acquired intangibles and pension interest) was up 5% to £40.1m on the comparable period in the previous year. Reported profit before tax advanced 6% to £36.1m.

Mark Allen, chief executive of Dairy Crest.

Half-year revenue at the UK dairy group slipped 3% to £776.9m. Increased sales of its five key brands and of milk to major retailers were offset by lower sales of doorstep and middle ground milk and lower revenues following the sale of a controlling interest in Wexford Creamery.

“Dairy Crest has enjoyed another good six months. In line with our strategy, we have continued to grow our brands, reduce our costs and control our debt. At the same time the improvements we have made to our quality, service and cost base have paid off with new contracts to supply fresh milk to major retailers,” says Mark Allen, chief executive of Dairy Crest. “With operational efficiencies and selling price increases in certain categories limiting the impact of higher input costs, we are confident that we can continue to deliver profits in line with our expectations.”

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Cutting Energy and Carbon Usage in the UK Food Industry


Baking bread in lighter tins, cleaning pipes with ice instead of hot water, and using microwaves to dry fruit gums and jellies: these are just some of the ideas being explored by the Carbon Trust and food industry leaders to cut energy use and carbon emissions at UK manufacturing sites.

Over the last year, the Carbon Trust has worked with companies including Allied Bakeries, Dairy Crest, Cadbury and Nestle to identify more energy efficient manufacturing processes with the potential to cut industry carbon emissions by some 450,000 tonnes a year: equivalent to taking more than 150,000 cars off the road.

Now, in partnerships with the Food & Drink Federation and Dairy UK, the Carbon Trust has challenged food producers and equipment suppliers to help prove the business case for these new processes. It is offering co-funding of up to £250,000 per project and in exceptional instances up to £500,000.

The challenge comes as part of the Carbon Trust’s Industrial Energy Efficiency Accelerator (IEEA) – a £15m programme aimed at catalysing low carbon innovation in industry.

“The way to make truly substantial cuts is to get to the very heart of manufacturing. We want to work with manufacturers to rethink production processes from the ground up. Innovation is the backbone of the low carbon industrial revolution that will not only reduce emissions but will also generate jobs and cut costs,” explains said Benj Sykes, director of innovations at the Carbon Trust.

Dairy

The food industry processes identified by the Carbon Trust as key targets for its IEEA programme include the cleaning of pipework in dairies. This is usually done by heating water to 80 C and flushing it through the pipes before sending it down the drain taking the wasted heat and energy with it.

‘Ice pigging’ – a process that uses solid plugs of ice to clean pipes and is commonly used in the oil industry – is a lower carbon alternative.

Homogenisation, the process that prevents a cream layer separating out from the milk, has also been identified by the Carbon Trust as an opportunity to reduce energy use and carbon emissions. Homogenisation is currently done by pumping milk at high pressure through narrow tubes to break up the fat molecules – a relatively energy intensive process. Lower carbon alternatives could include the use of ultrasound.

Together, these new methods of ice pigging and homogenisation could cut the dairy sector’s carbon emissions by around 5%.

Confectionery and Bakery

Carbon emissions from the production of gums and jellies in the confectionery sector stand at around 60,000 tonnes per annum. Using alternative methods such as microwave technology to dry (or ‘stove’) the sweets could cut these emissions by 10% a year, according to Carbon Trust estimates.

And in commercial bakeries, reducing the weight of baking tins, improving the efficiency of ovens and recycling waste heat could together cut the sector’s emissions by around 9%.

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Muller Increases Stake in Dairy Crest


Theo Muller, the privately owned German-based dairy group which is also the leader in the UK yoghurt market, has increased its stake in British dairy group Dairy Crest to 3.04%. The move has sparked speculation that Dairy Crest may become a bid target. Dairy Crest would carry a price tag of about £1b, according to analysts.

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Dairy Crest Extends Milk Contract With Morrisons


UK dairy group Dairy Crest has renewed its fresh liquid milk contract with retailer Morrisons through to 2015. “We are delighted to have been awarded this extension to our contract with Morrisons,” says Toby Brinsmead, managing director of Dairy Crest’s liquid products business. “We believe our clear focus on quality, service and cost puts us in a good position in a very competitive market.”

Earlier this year Dairy Crest secured a new contract with Sainsbury, Britain’s third-largest supermarket group, and this commences early in October 2010.

Sales of fresh milk to major retailers have continued to grow in the first six months, ending 30th September 2010, of Dairy Crest’s current financial year.

The middle ground liquid milk market also remains very competitive and has low barriers to entry. Dairy Crest’s sales volumes in this market in the first half are lower than last year.

Dairy Crest is in the process of a £75m capital investment programme spread over three years at its dairies division in order to improve the efficiency and infrastructure of its liquid milk operations.

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Dairy Crest Reassures Investors


UK dairy group Dairy Crest has moved to reassure investors following rival Robert Wiseman Dairies’ shock profits warning due to recent intense competitive pressures within the liquid milk market.

Whilst agreeing that the liquid milk market is currently very competitive, Dairy Crest has stated that its broad customer and product base and clear improvements in its cost base, quality and service make it confident that the group can deliver profits this year in line with expectations and provide a sound base going forward.

Dairy Crest will issue its half-year trading update on 30th September 2010.

Some analysts have pointed the finger at Asda, one of the UK’s ‘big four’ retailers, for starting a price war on liquid milk and so undermining the category’s profitability.

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UK Food and Drink Processors Make First Step Towards 2020 Water Target


Almost 500,000 cubic metres of water have already been saved as 36 of the UK’s leading food and drink manufacturers report their first full year progress on the voluntary Federation House Commitment (FHC) on water efficiency. This marks the sector’s first step towards achieving a 20% reduction in water use by 2020 compared to 2007, working with sustainability experts Envirowise who jointly launched the initiative with the Food and Drink Federation (FDF) in January 2008.

Companies including Cranswick Food Group, Dairy Crest, Greenvale AP, Mars UK, R&R Ice Cream, United Biscuits, Walkers, and William Jackson Food Group have contributed to a collective reduction in water use of 1.7% during 2008. Together signatories will have saved almost £500,000 in the purchase of water alone, not including the cost of water treatment and effluent disposal.

Andrew Kuyk, director of sustainability and competitiveness at the Food and Drink Federation, remarks: “The food and drink manufacturing sector is a significant water user and has an important role to play in helping to reduce stress on the nation’s water supplies. While there is still much to be done to achieve the 20% by 2020 target, we are delighted to see FHC members already making a positive impact on the environment.”

Water-saving measures being implemented by FHC members include improving water recovery and re-use, rainwater harvesting, cleaning-in-place and dry cleaning operations – as well as domestic changes such as fitting more efficient taps and toilets.

“The opportunities for water saving range from simple low-cost solutions through to those which require capital investment and greater lead-in times – offering benefits over the longer term,” points out Claire Sweeney, water specialitst at Envirowise. The FHC is open to all companies in the food and drink manufacturing sector.

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Solid Start to the Year by Dairy Crest


Dairy Crest has reported that it has started the year well and trading in the first quarter has been in line with expectations, as the UK dairy group continues to make good progress with its strategy to grow added value sales and reduce costs and borrowings.

The strategy of investing in its five key brands (Cathedral City, Country Life, Clover, Frijj and St Hubert Omega 3) is delivering growth and sales of these brands have increased by 3% compared to the same period last year. This builds on the strong growth that these brands have achieved over the last three years.

Dairy Crest has also reported continued good progress with sales of liquid milk to its major retail customers. Cost reduction projects are going to plan and the recently announced investment in the liquid milk dairies is on track to improve efficiencies and provide additional capacity.

Mark Allen, chief executive of Dairy Crest.

Dairy Crest is also maintaining good progress in managing its cashflow and expects this to deliver a meaningful reduction in year-end debt. The cash proceeds of Eur9m, resulting from the recent reduction in Dairy Crest’s stake in Wexford Creamery to 30%, have been used to repay debt.

“Dairy Crest continues to benefit from being a broadly based business. At the start of the year we set out our objective to increase profits, generate cash and further reduce our borrowings and our performance in the first quarter is in line with our expectations,” says Mark Allen, chief executive of Dairy Crest. “We remain well placed to deliver over the rest of the year.”

The group expects to issue its half-year trading update on 30th September 2010 and its interim results for the six months ending 30th September 2010 on 11th November 2010.

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£320 Million Capital Investment by UK Dairy Processors


Although 2009 was a tough year for UK dairy processors, the market fundamentals remain sound and reflecting this confidence in the long-term outlook, capital investment projects worth over £320 million are currently ongoing or just recently completed within the industry.

Encompassing liquid milk, cheese, yoghurts and chilled desserts, yellow fats (butter, spreads and margarine) and cream, the milk and dairy products market in the UK is worth over £7 billion. The UK dairy industry is dominated by three big processors – Arla Foods UK, Dairy Crest and Robert Wiseman Dairies – along with two large, vertically integrated farmer-owned co-operatives – Milk Link and First Milk. A third co-operative, Dairy Farmers of Britain, collapsed in June 2009.

These leading players are broadly based dairy processors active across a number of market sectors, with the exception of Robert Wiseman Dairies, which specialises in liquid milk and cream. The ‘top five’ are currently implementing or have just finished capital expenditure programmes with a combined worth in excess of £250 million.

Other smaller processors are also investing in expanding capacity or to improve efficiency, with projects valued at £69 million.

World Leading

Arla Foods is planning to invest in building a new one billion litres liquid milk dairy located on the outskirts of London as part of its UK growth strategy. The new facility is due to be operational in 2012.

“Incorporating the most sustainable building techniques the dairy will be the largest, most efficient and environmentally advanced in the world,” says

Peter Lauritzen, chief executive of Arla Foods UK.

 “We already have an industry leading site at Stourton, in Leeds, but our new, cutting edge, facility in London will be world leading and take dairy processing into the next generation.”

Arla Foods has also recently invested £70 million in expanding its UK flagship dairy at Stourton in Leeds, having already spent £100 million at the site, which processes milk for the major supermarkets as well as leading milk brand Cravendale. The additional investment at Stourton allows the site to process a range of fresh dairy products, including fresh cream and creme fraiche. It also permits Arla Foods to manufacture cottage cheese for the first time in the UK.

Improving Efficiency

Dairy Crest is to step up capital investment in its dairies division in order to improve the efficiency and infrastructure of its liquid milk operations and support its offering to key customers. The UK dairy group has earmarked £75 million over the next three financial years in addition to its normal replacement capital expenditure, to be funded from cash generated by the business.

“The increased investment in our liquid milk dairies will allow us to drive further cost efficiencies, remain competitive and maintain high levels of service to our customers,” says Mark Allen, chief executive of Dairy Crest.

Investment until now had been focused on the cheese business, where following the opening of the new Nuneaton packing plant, Dairy Crest has a world-class supply chain supporting its Cathedral City brand. Dairy Crest has also continued to invest in other parts of the business; for example, at Foston where a modern greenfield dairy has been created, readily capable of further expansion.

Glasgow-based Robert Wiseman Dairies is now proceeding with the final phase of expenditure at its new Bridgwater dairy to take the overall annual capacity at the site to 500 million litres at a cost of £10 million. The additional capacity when up and running later in the year will further improve operating costs and efficiencies at the site, as well as permit the growth in sales the company expects over the next few years. Last November, Wiseman opened a new £14 million depot at Amesbury which will be used to serve the south east of England more effectively. See ‘Sustained Capital Investment Pays Dividends For Robert Wiseman Dairies’ in this issue.

Dairy Co-operatives

Headed by new chief executive Kate Allum, dairy farmers co-operative First Milk is building a new £10 million state-of-the-art creamery on the Mull of Kintyre peninsula in Scotland. Milk Link, the UK’s other major dairy farmers co-operative and the country’s largest cheese processor, is investing about £5 million to expand and upgrade its dairy at Crediton. The project is part of the strategic refocusing of Milk Link’s long life milk and cream business, which entails consolidating all milk production at the Crediton dairy and closure of the smaller Kirkcudbright site in Scotland.

Regional Investment

Kate Allum, chief executive of First Milk.

The UK’s largest Stilton cheese producer, Leicestershire-based Long Clawson Dairy, is investing about £4 million, including grant aid from the East Midlands Development Agency, to expand production capacity by 25%. Long Clawson currently produces 6,700 tonnes of cheese a year and exports over 1,000 tonnes to 36 countries worldwide.

“The expansion will enable us to fulfill the growing demand for Stilton worldwide and to develop new products, penetrate new markets and create new jobs locally as well as enabling us to make significant savings on our water and electricity resources,” points out Martin Taylor, chief executive of Long Clawson Dairy.

Backed by a £5.7 million grant from the South West Regional Development Agency, Cornwall-based Trewithen Dairy is increasing its production by 80% from 25 million to 44 million litres of milk a year. The £11.5 million development programme will include an expansion of production capacity for fresh milk, clotted cream and butter milk, along with improved infrastructure, investment in new equipment and purpose-built new offices and staff facilities to replace the temporary accommodation.

Dairy Ingredients

Specialist dairy ingredients supplier Meadow Foods is investing £2 million to expand manufacturing capacity and improve efficiency at its site at Holme on Spalding Moor in Yorkshire. Meadow Foods has an annual turnover of £250m and handles 420m litres of milk and over 80,000 tonnes of cream each year from a network of 400 farmers nationwide.

It recently acquired Nene Valley, a subsidiary of the failed Dairy Farmers of Britain and a leading processor of packaged cream for the food ingredients market, for an undisclosed sum. “Our strategy is to develop our business to provide long term security of supply of critical dairy ingredients to the major food manufacturers in the UK,” says Simon Chantler, executive chairman of Meadow Foods.

Yoghurt Market

Having recently completed a new £60 million dairy at Telford in Shropshire and launched its first British yoghurt brand, NOM Dairy UK is .building a new £5 million refrigerated warehouse at the site. Part of NOM, the leading dairy products company in Austria, NOM Dairy UK was established in 2008.

According to David Potts, chief executive of NOM Dairy UK, over half of the £1 billion UK yoghurt market is supplied by imported product, which provides a massive opportunity for local supply.

Largest Ever Investment in Northern Ireland

In Northern Ireland, Dale Farm, which is owned by co-operative United Dairy Farmers, is investing £39 million across its three sites in support of its rapidly growing sales in consumer products and specialist ingredients. The expansion programme is the largest ever investment in the Northern Ireland dairy sector by a single company.

On the island of Jersey, work is underway on a new £5 million purpose built dairy at Trinity. Capable of processing all of the island’s milk, the new dairy will increase production and efficiency and help in the development of export sales for Jersey Dairy, the island’s sole dairy processor. Jersey Dairy manufactures a range of dairy products including milk, butter, cream, creme fraiche, yoghurt and ice cream. See ‘Work Starts on New Jersey Dairy’ in Food & Drink Business Europe, September 2009 issue.

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