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Retailers Must End Crippling Approach to Dairy

NFU Scotland has written to all major retailers calling for them to immediately address their crippling approach to sourcing milk and dairy products for their shelves.

The letters to retailers were sent as the most recent investigation of dairy supply chain margins exposed the extent to which retailer practices are driving value out of the whole dairy chain with producers ultimately footing the bill.

The 2011/12 DairyCo report shows retail prices for fresh liquid milk to have been at their lowest level for seven years and while consumers have been getting a good deal on milk, supermarkets have used milk and dairy products to continue generating significant profits from their whole grocery offering.  The battle between processors to maintain supermarket business for fresh milk has ultimately seen both protect margins by passing the pain on to producers.

In his letter to retailers, NFU Scotland President Nigel Miller said: 

“Initiated by the discounters, and rapidly adopted by other UK retailers, milk price wars have propelled the retail price of milk to its lowest level in seven years and does little to reflect the true cost of producing that product. Thanks to a co-ordinated approach in the current crisis, consumers are becoming increasingly aware of who is really benefiting from these wars.

“It is fair and reasonable that those producing milk receive a price that covers the cost of keeping and milking the cows and provides sufficient returns to allow farmers and their families a reasonable standing of living, and to invest in their businesses. 

“Retailer Corporate and Social Responsibility statements suggest a commitment by supermarkets to share profitability and support sustainable local farm businesses.  This is an aim that supermarkets must deliver on and discussions with consumers in recent days show that many are appalled at the treatment being dished out by retailers to those who help fill a supermarket’s dairy shelves.
 
“While supermarket contracts for own label fresh milk have offered relief to the small number of producers fortunate enough to be in such an arrangement, the time has come for supermarkets to stop hiding behind these contracts and deliver fair pricing across the entire dairy category. Farmers whose milk goes for cheese, branded milk, butter or cream face the same costs as those who directly supply own label fresh liquid milk, and we challenge supermarkets to implement a pricing structure that reflects that fact.
 
“Retailers have enjoyed healthy margins across the entire dairy category for years and the time has come for them to demonstrate the value they place on having fresh dairy products available to their customers in stores by delivering a fair share of the margin down the chain.” 

Notes to Editors

• According to DairyCo’s Supply Chain Margins Report 2011/12, average retail prices for fresh milk dropped to their lowest levels in over seven years. In the past, increases in processor costs have been matched with rising retail prices but a significant factor in the liquid milk market in 2011/12 has been the lack of such an increase. Price promotions on liquid milk and consumers tightening their belts meant retail prices did not rise. Prices were down to 55.5ppl, 4.6% lower than the 2010/11. The recent milk price cuts of up to 4p per litre, announced since the report was completed, are evidence of the continued squeeze on processor gross margins being simply passed on to farmers. The DairyCo Supply Chain Margins report can be downloaded at www.dairyco.org.uk.

Ends

Contact Bob Carruth on 0131 472 4006
 

Date Published:

News Article No.: 71/12


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