Muller chief executive Patrick Muller spoke to Farmers Guardian as the dairy completed a £15m upgrade at Bellshill dairy
Underinvestment and a loss of connection with the consumer have hit the liquid milk markets.
Consumers were looking for innovation, but the industry had been too focused on reducing costs.
Muller chief executive Patrick Muller was speaking to Farmers Guardian as the processor completed a £15 million investment in a liquid milk and cream facility at its Bellshill dairy, the largest investment in Scottish dairy processing in a decade.
“To secure an industry long term you have to do two things, you have to invest and you have to be relevant,” he said.
“I think you can see an industry in consolidation. We are probably at the tipping point,” he said.
“It is still a very difficult market, but I see us as very well suited to win in it.”
Mr Muller compared the UK with the German liquid market, where about 80 per cent of milk sold was UHT, warning if the UK lost its market it could go the same way.
“In the UK, you go to the supermarket and go wow this is amazing,” he said.
“People tell me we work in a commodity. No we do not.
“It is very unique. If that industry goes, it is gone forever.”
Mr Muller added all of the focus had been on reducing costs, not on what the consumer wants, leading to falling liquid milk consumption.
But Muller was now looking to innovate with new products, such as reducing sugar, added protein and lactose-free, to give the consumer what they were looking for. They were also looking to boost their environmental credentials, with plastic bottles 100 per cent recyclable and using 40 per cent recycled material.
It was also focused on its Milk and More delivery business with the business back in growth after 40 years of decline.
On cream, they were gearing up for a busy Christmas period but had also seen increased sales year round as consumers became more experimental with cooking.
“The flavoured milk is another growing market,” milk supply director Rob Hutchison said, adding it was helping reignite consumers’ love for the product and its appeal to the next generation.
“It is one vehicle for that. If they do not want to drink plain, it gives them another option to get nutrition into them.”
With regards to Brexit, Mr Hutchison said there was a big opportunity to offset alot of imports, but that was a big part of their strategy regardless of what happens with Brexit.
“Even if you take flavoured milk, a large percentage of what we are replacing is imported.”
Mr Muller added there were also opportunities to export.
On contract regulation, Mr Hutchison said they were supportive, in principle, of regulation, with regards to treating farmers fairly, such as what is contained in the voluntary code which they already follow.
“To an extent we are open to discussions around the exclusive contracts. Maybe they should have some options.”
However, they were more cautious over the removal of discretionary pricing.
“If we take an example, our milk price is at 28ppl.
“Linking it to AMPE it is more like 24ppl.”
He was also concerned it could limit their ability to offer products which were designed to offset volatility. This year, the dairy has introduced options including Futures contracts and an opportunity to fix a percentage of milk production at 28ppl, and he expected they would introduce more next year.