Dairy Crest milk round gets a £33M Express delivery

Dairy Crest hopes to increase direct sales of its dairy products to consumers following the acquisition from Arla this month of Express Dairies' depots and dairies in Liverpool and Nottingham, for £33M.

The move is part of the milk processor's strategy to create the UK's leading 'middle ground' service to independent retailers and increase doorstep deliveries to 2M customers. The acquisition brings with it 77 distribution depots and 1,850 employees.

Dairy Crest, which is selling about 2,000l of milk a week per round, compared with Express' 1,600l a week, said there was significant potential for additional doorstep sales. Dairy Crest workers were delivering twice the amount of orange juice and £320/week of cheese, yoghurt and bread, compared with the average £100/week by Express staff. Dairy Crest plans to spend up to £7M over the next year promoting its enhanced delivery service.

Chief executive Drummond Hall, who will be succeeded at the end of the year by Mark Allen, currently executive md of Dairy Crest's dairy division, said: "The integration of Express Dairies into our existing operations will generate substantial operational and financial synergies."

Analyst Andrew Saunders at Numis Securities said: "Despite the declining nature of the UK doorstep market, this has been successfully managed in the past by Dairy Crest and we believe this deal gives attractive scope for earnings enhancement."

Meanwhile, Robert Wiseman Dairies said that sales in Tesco of its Extended Shelf Life milk, launched in June 2005, had risen to more than £10M a year. It said its total sales volumes in the second quarter were 2.5% higher than a year before. From August 1 it will cut the payment to its 800 milk suppliers by 0.9p/l to 18.38p/l until the end of January 2007.