Dairy Crest announces plans to close dairy operation in Cambridgeshire

FARMERS’ leaders have expressed concern after a major milk company announced plans to close two of its dairies, including one in East Anglia.

Dairy Crest said the proposal to consult on the closure of dairies, one of which is in Fenstanton, Cambridgeshire, and the other in Aintree, Liverpool, is part of its “long term plan to reduce costs and sustain profitability in an extremely challenging market environment for its liquid milk business”.

The company’s board also announced that, separate to this, its current contract to supply liquid milk to Tesco will not be renewed when it comes to an end in July 2012, but it also reported an improved position on its debt.

Around 3% of Dairy Crest’s liquid milk sales in 2011/12 were made to Tesco. Despite the loss of the contract, Tesco remains a large and important customer for its key UK brands, it says.

Dairy Crest said strong performances from its foods businesses compensated for more challenging trading in the dairies division.

“The announcements that Dairy Crest is making today reflect the ongoing competitive environment facing its dairies business and the group’s determination to take proactive action in line with the overall strategy being pursued by the board,” it said.

It is now looking at a range of options to restore its dairies business to “a satisfactory level of profitability”, as it enters into consultation with staff over proposals to close two dairies later this year.

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The company has been implementing an ongoing �75million investment programme in its dairies business to increase efficiency and capacity at its other three polybottle dairies at Severnside, Gloucestershire, Chadwell Heath, London and Foston, Derbyshire.

The company said the challenges of the liquid milk industry were underlined by the loss of the Tesco contract.

“Whilst the loss of this supply contract is disappointing, it demonstrates the need for the group’s continuing strategy of investment in, and consolidation of, the Dairies business. The loss of this contract does not change the group’s wider and important relationship with Tesco across key UK brands Cathedral City, Country Life, Clover and Frijj and will not impact Dairy Crest’s profit expectations for the year ending March 31. 2013

Chief executive Mark Allen said: “Along with the rest of the sector, our dairies business is under sustained pressure and we have to continue to act decisively to protect its future.

“The decision to consult on the closure of our Aintree and Fenstanton facilities has not been taken lightly, but 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.

“The proposals we are announcing today are part of a series of actions designed to restore our dairies business to an acceptable level of profitability over the medium term.”

National Farmers’ Union regional policy adviser Alex Butler-Zagni said: “Dairy farmers across the East of England will be very concerned at this news.

“Dairy Crest is a major milk buyer in our region and the loss of Fenstanton would see further erosion of our dairy infrastructure, as well as potentially hundreds of job losses. We will be talking to our members who supply Dairy Crest and to the company about future supply arrangements should this closure go ahead.

“Today’s announcement illustrates how difficult the situation is within the liquid milk sector. It has been tough for dairy farmers for a number of years and we need to see better returns for both farmers and milk processors to secure a better future for dairy farming in our region.”