Dairy Crest job cuts ‘proves liquid milk faith’

Experts said the closure of the sites would improve the long-term profitability of the business as it would resolve Dairy Crest’s over capacity in glass bottling and reduced plastic costs.

The firm has already invested £75M into the ailing sector and confirmed that these cuts would also incur further costs of £15M.

But Damian McNeela, an analyst at Panmure Gordon, told FoodManufacture.co.uk that the firm had its work cut out to restore the business.

He said: “I don’t think this means they will sell the dairies business. Firstly, who is likely to buy the business? And secondly, how does it meet its requirements for its cheese division and the Frijj brand?​

“I think because it has been a loss-making business people will speculate that it should be sold. But Dairy Crest will have committed £90M to the dairies business by the end of this financial year​.”

Market leadership​

McNeela added that the firm needed to keep up with its rivals and stressed, despite the investment, it was unlikely to make a bid for market leadership.

 “Dairy Crest needs to keep pace with its competition but it is not likely to be the leader in the market in the near term, with Wiseman well invested and Arla’s new Aylesbury factory expected to increase its efficiency,”​ he said.

The firm today announced that consultations had begun at two of its dairies in Aintree and Fenstanton as the firm seeks to restore its dairies division to profitability.

The closure has been facilitated by the £75M investment and will see production of its glass-bottling facility at Aintree transferred to the firm’s facility in Hamworth, London.

Production from its Fenstanton facility will be switched to its three other polybottling sites in Gloucestershire, London and Derbyshire.

The firm cited a combination of falling glass-bottled milk and a wider decline in domestic sales as the reason for the consolidation.

Mark Allen, chief executive of Dairy Crest, said: “The decision to consult on the closure of our Aintree and Fenstanton facilities has not been taken lightly. We believe that this proposed restructuring of our Dairies business is the right decision for the long-term. We will do all we can to help employees who may be affected by these proposals.”​

Tesco​

The news comes as the firm also revealed that its current contract to supply liquid milk to Tesco would not be renewed following its completion in July.

Dairy Crest confirmed that the dairy closures were not related to the loss and confirmed that it would continue to maintain relations with Tesco across its key UK brands.

Allen said: “The challenges in the liquid milk industry are further underlined by the disappointing loss of the Tesco liquid milk supply contract.  However it represents just 3% of our total liquid milk volumes and has not driven the restructuring decisions which we are announcing. Tesco remains a large and important customer for our key UK brands Cathedral City, Country Life, Clover and Frijj.”​

Last month, Julian Wild, food group director at law firm Rollits, warned that the tough conditions in the UK market could see Dairy Crest exit the sector after the firm admitted sales were “under pressure​”.

He said: “Dairy Crest may see the writing on the wall. It may decide it’s not worth a gamble and I would not be surprised if, long term, it did not see a future in liquid milk. It’s a very tough business now​.”