Dairy Crisis

Christmas milk sales down £22M

By Rod Addy contact

- Last updated on GMT

Retailers are not creaming off substantial profits friom milk, the NFU says
Retailers are not creaming off substantial profits friom milk, the NFU says

Related tags: Milk, Iri

Milk sales plunged by £22M over Christmas, despite rising volumes sold in the period, reflecting competition among retailers to keep prices down, according to market analyst IRI.

The data, which is mainly based on sales in the top supermarkets, indicates the total impact of retailers’ price cuts.

Fresh milk value sales fell from £323.5M in the six weeks to December 28 2013 to £301M in the same period last year. However, the total volume of milk rose from 494.5Ml to 498.9Ml.

While sub-sectors such as organic milk and even dairy alternatives form part of the figures, they represent small sections of the overall market. The bulk of the drop came in sales of standard fresh milk, IRI told FoodManufacture.co.uk.

“Prices have gone down a lot, mostly on the biggest-selling sizes,”​ said Tim Eales, IRI director of strategic insight. “Prices on four pint formats have been dropping and are very likely down to 89p in some stores.”

Desperate battle

Rob Harrison, chairman of the dairy board at the National Farmers Union (NFU), said the figures had mainly been driven by mainstream supermarkets’ desperate battle with discounters such as Iceland, Aldi and Lidl.

“In the past, retailers have made good profits on milk, but the discounters have said ‘we don’t need to make that kind of money’. Iceland dropped the price for four pints to 89p and now Asda has gone down to that.”

He said the popular view of retailers claiming major profit margins from milk was currently false and that the situation was more complicated.

“Big retailers on liquid milk could do a lot more. Prices need to be more than a pound for four pints to make sure there is stability in the supply chain. But the major multiples are dropping prices to compete with the discounters.

‘Significant loss’

“They have cut margins themselves in order to do this, as well as putting significant pressure on the supply chain. I know retailers are making a significant loss. They have taken the decision to lose money on milk and other staple items because of competition and declining market share.”

Eales added: “Milk has been used as a way of drawing people into stores for quite a long time. Bread is looking pretty similar and cereals and sugar are in much the same situation.”

Value sales across the whole of 2014 showed similar drops, according to IRI. Sales of standard fresh milk fell from £5.2bn in the 52 weeks to February 1, 2014 to £4.9bn in the year to January 31, 2015, although annual volume sales did decline marginally.

Dairy farmers were also seeing milk prices drop, but that was not just because of pressure from retailers, but because of oversupply and resultant plunging prices in the world market, said Harrison.

There were signs that side of the market was starting to recover, he said, but this would not ease pressure on retailers, because they were facing different challenges.

The Dairy All-Party Parliamentary Group aims to launch its report on the Sustainable Competitiveness of the British Dairy Industry on March 3 at the House of Commons.

Related topics: Supply Chain, Dairy

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