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Gap widens in UK dairy market as Arla announces revenue growth

Muller’s latest price drop has left it almost 4.5ppl behind Arla, as the gap between the top paying and bottom paying processors continues to widen.

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Gap widens in UK dairy market as Arla announces revenue growth

Producers on Muller Direct Premium contracts will be paid 25.75ppl from October 1.

 

Arla announced it would hold its price for the eighth consecutive month at 30.22ppl for September.

 

Liquid processors have been lagging behind.

 

Prices at cheesemakers such as Barber’s (27.75ppl) were ahead of the likes of Freshways (25ppl) and Saputo UK (formerly Dairy Crest, 29.9ppl), leading to industry analysts describing the liquid market as ‘broken’.

 

Muller blamed record levels of milk production at a time when demand for fresh milk and other dairy products was falling. Rob Hutchison, the processor’s milk supply director, highlighted the plummeting values of commodity cream.

 

He added while the supply and demand imbalance persisted, it appeared market values would remain depressed and highlighted those who had used the fixed price option would be cushioned to a certain extent.

 

But it needed the whole industry to work more coherently and effectively together to align with the needs of customers and consumers.

 

“Muller is playing its part by ensuring it has the dairy network capabilities, the fully recyclable and light-weighted packaging proposition and the herd health standards which consumers demand,” Mr Hutchison said.

 

“We are confident this will place our business and supplying farmers in a strong position as the sector emerges from this period of significant and fundamental change.”


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Support

 

But Arla seems to have found support from its pan-European business, as well as its brands.

 

Dairy Group analyst Nick Holt-Martyn said: “It must be to do with the European group. They cannot be 5ppl better than Muller on the back of the UK market.

 

“They also have a broader portfolio.”

 

Arla Foods UK reported ‘rare market stability’ as it announced 3 per cent revenue growth in the first half of 2019, with net revenue up to £987 million.

 

It highlighted its branded agenda as playing a ‘strong role’ with notable growth of its Arla BoB range at 46 per cent and its Arla Pro at 48 per cent.

 

Natalie Knight, group chief financial officer, said they had continued to build engagement and relevance of brands through ‘innovative products, brand activation and digital content’.

 

She added consumers wanted ‘more nourishing and sustainable food choices’ with Arla intensifying its ‘climate agenda’.

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