Dairy Crest Group PLC
30 January 2001
DAIRY CREST GROUP plc creates UK’s largest “super dairy”
Dairy Crest, the UK’s leading dairy business with its market leading brands, Clover, Cathedral City, Davidstow and Frijj and the Yoplait brands, today announces the latest phase of its integration plan for the recently acquired Unigate dairy and cheese businesses.
Commenting on today’s announcement, John Houliston, chief executive, said: Dairy Crest intends to set new industry standards for efficiency, quality and service across its business. The creation of our second super dairy enables Dairy Crest to become a long term market leader in retail liquid milk and to benefit fully from the final stages of industry consolidation.”
Highlights of the second phase to achieve the efficiencies and financial benefits outlined at the time of the Unigate acquisition in July 2000 include:
* a £39m investment in the development of the UK’s largest super dairy at Severnside, Gloucestershire, to increase capacity to 500 million litres pa;
     – £23m to expand retail liquid milk capacity and
     – £16m  to  create a dedicated facility for added value retail milk
     products including  organic  milk, regional milks, fresh  flavoured  milk
     drinks, milk shakes and potted cream;
*  consolidation of Stilton processing at Hartington, Derbyshire following
   the completion of £10m investment;
*  concentration of its cheese prepacking at Maelor, Clwyd and Frome,
*  establishment  of  Crudgington, Shropshire as the  centre  for  retail
   dairy spreads, packet and speciality butters;
*  significant increase in ingredients processing efficiency at Chard,
*  closure of five processing plants.
Dairy Crest will establish its second, and the UK’s largest, super dairy at Severnside, Gloucestershire, following an investment of £23m which will more than double the current capacity and create 320 new jobs. The Severnside dairy expansion will replace existing capacity and the plant will be capable of processing 500 million litres of milk pa by September 2002, operating at high levels of capacity utilisation. The dairy will become the company’s centre for the processing, packing and distribution of milk in cartons and polybottles to multiple retail customers in the Midlands, Southern England and Wales.
A further investment of £16m, will enhance the dedicated facility for producing added value retail milk products including organic milk, regional milks, fresh flavoured milk drinks, milk shakes and potted cream. The enlarged Severnside operation will complement Dairy Crest’s recently announced £15m investment to create a “super dairy” at Chadwell Heath in London with an initial capacity of 400 million litres pa. The Severnside development, which replaces processing capacity at existing sites, will result in the closure of the liquid milk dairies at Thornbury, South Gloucestershire in November 2001, Marshfield, Cardiff in February 2002 and Kidlington, Oxfordshire in September 2002, with the combined loss of approximately 600 jobs.
Dairy Crest, the leading producer of Stilton, will consolidate its blue cheese processing and packing operations at Hartington, Derbyshire following the successful completion of a £10m investment to develop its blue cheese capacity making Hartington the premier blue cheese manufacturing site in the UK. The Harby plant in Leicestershire will close in April 2001 with a combined net loss of around 100 jobs. Additionally, the company will concentrate its cheese prepack operations at Maelor, Clwyd and Frome, Somerset, with the consequent closure of its operation in Carmarthen, Dyfed in October 2001, resulting in the net loss of 95 jobs. Maelor, which is already the largest and most efficient cheese prepack operation in the UK, has benefited from the recent investment of £10m in state-of-the-art automation.
Dairy Crest will also rationalise its butter and milk powder manufacturing operations. Crudgington, Shropshire, which produces the market leading branded dairy spread Clover, will become the centre for the company’s range of retail dairy spreads, packet and speciality butters. Packet butter processing will be transferred from Chard, Somerset, to Crudgington and skimmed milk powder production at Crudgington will cease.
Chard will double its milk volume throughput to around 450 ml pa and will subsequently become a dedicated dairy ingredients site for production of bulk butters and skimmed milk powders. This reconfiguration will be completed in April 2001, and will significantly enhance efficiency. As a result there will be a net loss of some 70 jobs at Chard and 40 at Crudgington.
John Houliston, chief executive, said: “These projects announced today, together with those announced in November 2000, confirm that the £25m synergy benefits outlined at the time of the Unigate acquisition are being achieved in line with our projections. The related capital and exceptional cash costs confirm our previous indications.
Current trading is in line with expectations. The interest charge for the year is likely to be about £2m lower than previously expected due to reduced levels of working capital and lower than anticipated interest rates.
We believe Dairy Crest is well positioned to continue to deliver attractive shareholder growth.
For further information
Dairy Crest Group plc                             020 8910 4000
John Houliston, Chief Executive Ian Laurie, Finance Director Colleen Amos, Communications Manager
Citigate Dewe Rogerson                            020 7638 9571
Cary Martin, Julian Walker
NOTES FOR EDITORS – Dairy Crest Dairy Crest Group plc was floated on the London Stock Exchange in August 1996 and is the UK’s largest dairy food company with leading positions in all sectors of the dairy market – liquid milk, fresh flavoured milk drinks, cheese, dairy spreads, fresh dairy products (yogurt, fromage frais, chilled desserts) through Yoplait Dairy Crest and dairy based ingredients. Dairy Crest currently operates 21 manufacturing sites and employs approximately 9,000 people. The company focuses on building leadership positions in growing, added value markets and serves both the retail grocery trade and major food manufacturers.
Dairy Crest is the UK’s largest purchaser of milk processing around 3 billion litres pa.
When the investment is complete in September 2002, Severnside will process in excess of 700 million litres pa, of which
–    500 million litres pa will be through the new  super dairy  and
–    200  million  litres pa will be dairy ingredients, essentially  butter
     and skimmed milk powders.
The Severnside development complements the announcement in November 2000 to create a 400 million litres pa super dairy at Chadwell Heath in London. Both these developments will increase operating efficiency by consolidating Dairy Crest’s existing liquid milk processing through fewer sites.
Cathedral City, Davidstow, Wexford and Mr Wilson’s cheese brands make Dairy Crest the leading supplier of mature cheddar in the UK and the company is also the UK’s largest producer of Stilton.
Clover is the brand leader in the dairy spreads sector and Dairy Crest is also the major producer of Country Life packet and spreadable butter. Dairy Crest is also a strong number two in retail liquid milk and the leader in doorstep deliveries in Southern and Eastern England. Frijj is the brand leader in the fresh flavoured milk drinks market.
The company is a leading supplier of fresh dairy products through the Yoplait Dairy Crest joint venture, with its brands Petits Filous and Frubes, together with ranges including Wildlife and Weight Watchers from Heinz.
Dairy Crest is also the leading British producer of dairy ingredients such as butter, skimmed milk powder and whey based products supplied to UK food manufacturers.
Dairy Crest recently completed its £33m investment in a new national distribution centre and cheese maturation store at Nuneaton, Warwickshire.
In November 2000, the company announced the first phase of the integration of the Unigate acquisition with the expansion of the Chadwell Heath dairy in London and the closure of its sites at Westway in London, Fermanagh in Northern Ireland and Sturminster Newton in Dorset. When the second phase of integration is completed Dairy Crest will operate 15 manufacturing sites. In November 2000, the company also announced plans to form a strategic partnership with Milk Link to establish the Chard creamery in Somerset as the largest and most efficient butter and milk powder plant in the UK.
The Group has an annualised turnover of £1.5bn following the acquisition of Unigate’s dairy and cheese businesses in July 2000.