A great bastion of UK dairy production is looking a bit crestfallen today. Amid an ‘extremely challenging market environment’ for its liquid milk business, Dairy Crest’s management has decided to close two production sites, putting 500 jobs under threat. And, if that wasn’t bad enough, the company has also just lost its contract to supply milk to Tesco.
Dairy Crest sites in Aintree and Fenstanton in Cambridgeshire are being sidelined as milk production is transferred to three ‘polybottle’ dairies in Severnside, Chadwell Heath and Foston in Derbyshire.
The newfangled milking facilities are receiving £75m of investment which should help secure their future, but the older ones are reliant on residential delivery of milk in glass bottles – a market which has declined massively. Part of the problem is that Aintree’s plant is designed for glass bottling, which has suffered a big fall in sales as fewer people now have milk delivered to their home.
Dairy Crest is protesting that the Tesco milk contract only made up 3% of total liquid milk sales for Dairy Crest and won’t harm next year’s results, but you can bet that CEO Mark Allen will be smarting from losing a major contract with the UK’s biggest supermarket.
It’s not all doom and gloom though. The Dairy Crest Group also produces the Cathedral City, Country Life, Clover and Frijj brands, all still stocked by Tesco. These are the higher-margin products and mean less reliance for Dairy Crest on that notoriously cut-throat milk trade.