In a dairy industry which has endured 18 months of pain there are very few, if any, mainstream processors currently looking for extra volume.
The reasons for this are well known – the retail price war and slow global demand being two of the main drivers – and it has hit the ‘conventional’ dairy industry hard.
And while the Organic Milk Suppliers Cooperative (OMSCo) is not totally immune to the vagaries of the market it is, however, eyeing cautious expansion over the next few years as it underpins sustained growth with a thriving export trade.
With a trade agreement struck at the end of last year with North American-based Organic Valley/CROPP cooperative, the deal has facilitated greater access to the US market for a company which is already exporting large volumes of organic cheddar to the US.
For managing director Richard Hampton, speaking at OMSCo’s small headquarters in Weston-Super-Mare, Somerset, the company’s export focus and lean structure are crucial for its long-term stability.
Mr Hampton said: “The US deal gives us reasons to be optimistic and export allows us to supply UK products across the world.
“We needed to focus on export in order to spread our risk and secure access to growth markets. This allows us to deliver a stable milk price to our farmers.”
Part of the challenge for an organic company in the UK is the fact this country has falling demand for organic dairy products; the only developed country to be in such a state as the likes of the EU, US and Australasia all see growth.
The current retail price war has also made the position of liquid organic milk much tougher, with the cuts by many retailers to £1 for four pints of conventional milk increasing organic’s premium over this product from 40 per cent to 100 per cent in some cases. This in turn has seen organic milk sales fall by 5.4 per cent in the UK.
Add to this the emerging challenge from non-cow milk products such as almond and soya alternatives, Mr Hampton praised the relationship the company has with Yeo Valley, with a lot of its milk going to firm for its thriving branded organic products.
And with international markets opening up, it is enabling OMSCo to target higher value buyers and have what Mr Hampton believed was a good mixture of customers.
He said: “The US is a high growth market and it has taken us five years to achieve the correct standards for access to that country.
“We are the first and only Cheddar (Kingdom Cheddar) to be in the US marketplace and with CROPP we have the right partner for that market, which is crucial.
“We are developing specific products for specific markets, with non-GMO products for the US and ones with the technical attributes they do not have. We are also gaining Chinese accreditation, which is important.
“By having access to export markets it gives us a really rounded business and when you think 80 per cent of butter shipments to the US come from OMSCo, when we are only 2 per cent of the market, it shows the strength we have.”
And he is clear that by having overseas customers and a diversity of buyers, it prevents the company being hit hard when trying to broker organic liquid milk in the UK.
He said: “Organic balancing is viciously expensive and to have too many litres at the wrong time can be horrendous. When you consider the UK organic cheese market is very small and that creates a reliance on liquid and yoghurt, the seasonal production profile means we have a toxic mix.”
Acknowledging there was a challenge when it came to accessing processing infrastructure in the UK, Mr Hampton said there were still no plans to invest in stainless steel themselves, even though its powders were manufactured in France and Belgium, alongside existing UK relationships with Wyke Farms and Dansco Dairy.
With 250 million litres of milk currently being processed by the cooperative, Mr Hampton said OMSCo would be looking recruit more farmers but the two-year organic conversion period was proving to be a challenge for some.
With the firm paying in the region of 37ppl and offering a 3ppl incentive for extra winter production, the gap between it and conventional processors on price is large.
He said: “The bigger the gap between organic and conventional prices the more reason there is to convert. But maybe the reason people have not done so is because prices have been so low for conventional suppliers that it has stunted their ability to convert.”