Dairy farmer co-op moves into top three with £75m takeover

The UK's biggest integrated milk supply and processing co- operative has been created with the £75m purchase of Associated Co-operative Creameries (ACC) by Dairy Farmers of Britain (DFB).

The acquisition makes DFB the third largest milk processor in the UK, behind Arla Foods and Dairy Crest, with a capacity of 1.3bn litres a year. It will have a turnover in excess of £750m a year and more than 3,000 employees.

ACC has 675 direct suppliers providing around 500m litres of milk a year, although it is unclear how many will sign up for full DFB membership. DFB is owned by 3,250 dairy farmers in England and Wales but would like to boost this figure to nearly 4,000 through the acquisition.

The purchase of ACC includes seven processing plants and 60 distribution depots plus ACC's brands, which include Dairygate, Cadog, Dawn and Yorkshire Milk.

DFB chairman Rob Knight said the co-op plans to build on these brands and invest in further brand development, both for liquid milk and cheese.

Philip Moody, corporate development director at DFB, said the acquisition was likely to increase payments to dairy farmers through integration of the supply chain. "This will change the face of the dairy industry for ever, moving farmers towards being price makers as opposed to price takers," he said.

DFB has processing facilities in Chard and Peterborough and operates a joint venture at Westbury with the co-operatives First Milk and Milk Link. ACC farmers do not supply these plants.

Meanwhile, Arla Foods is to strengthen its position in Scotland and challenge Robert Wiseman Dairies in the north by opening a £10m dairy at Lockerbie early next year. The move follows Asda's decision to make Arla its sole supplier. The retailer has 36 Scottish stores.

The new dairy will be capable of processing 150m litres of fresh milk a year, around 70m litres of which will go to Asda.