UK dairy products firm Dairy Crest has said that it will cease supplying fresh milk to Tesco following a decision by the UK supermarket giant to consolidate to two fresh milk suppliers.

Dairy Crest's current sales of fresh milk to Tesco are worth approximately £60m (US$108.1m) per annum. Its sales to Tesco will be halted during the first quarter of 2005.  
Dairy Crest said the profit impact of the change has been initially estimated at between £12m and £15m on an annualised basis. The company said it plans to implement a range of initiatives to mitigate this impact that may include further discussions with all of its customers and suppliers as well as a review of its current cost base. 

Meanwhile, Scottish firm Robert Wiseman Dairies confirmed that it had been successful in Tesco's review of its fresh milk supply arrangements. The company said it had been informed that its share of the supermarket group's fresh milk requirement will increase from 40% to around 60% from early 2005.

Earlier this week Robert Wiseman announced that it is to increase its supply of fresh milk to Sainsbury's, while Arla Foods UK said it is to cease fresh milk supply to the supermarket chain from January 2005.

The announcements come just three months after Robert Wiseman Dairies and Dairy Crest announced that that they had been given notice by supermarket chain Asda that their supply contracts were to be ended, following a decision by Asda to source its milk from only one supplier, namely Arla Foods.