Dairy Crest to be "more selective" over middle-market contracts

Dairy Crest to be "more selective" over middle-market contracts

Dairy Crest is evaluating its strategy to supply milk to the so-called "middle market" of smaller retailers and foodservice customers to revive profitability at its liquid dairy business.

In a trading update released this morning (19 May), the UK dairy group said that profits for the 12 months to 31 March increased 5% to GBP87.6m (US$141.7m) as weakness in its milk business was offset by higher profits at its cheese and spread units.

The company said that higher competition and input costs resulted in a 22% drop in profits at its dairies business, which fell to GBP27.1m despite a slight lift of 0.8% in sales at the unit.

"Our dairies business is facing an increasingly tough operating environment. A very competitive market has put pressure on this side of the business," CEO Mark Allen said.

In order to protect profitability at its dairies unit, a spokesperson for Dairy Crest said that the group was being "more selective" over its contracts to supply middle-market customers and placing greater focus on supplying milk to the large supermarkets.

During the year, Dairy Crest expanded its sales of liquid milk to the UK's large retailers and secured a new contract to supply Tesco with 5% of its milk.

In order to expand sales and profitability at its liquid milk business, Allen said that the group is focused on reducing costs while also increasing quality.

"We are concentrating on our quality, the efficiency of our factories and our service levels to customers," he revealed.

Although the company conceded that its dairy business was facing a difficult outlook, Allen insisted that the group remained committed to being a "broad-based" dairy business.