Tesco has announced it is extending its sustainable pricing model to its entire British cheese base and will pay producers nearly 30ppl, well above the current market average.
The announcement has been hailed as a ‘significant move’ by the NFU and Farmers For Action who said it showed Tesco recognised the challenging times the dairy industry is currently facing.
Tesco already pays among the highest prices in the country for its liquid milk to the 600 members of the Tesco Sustainable Dairy Group (TSDG), which was established in 2007.
As of August 31, it will pay 29.93ppl to producers for milk supplied for cheese. The price has been set until February 28, 2016.
Under the arrangement, Tesco will pay Adams Foods an increased price for the Tesco own-label cheese it supplies. In turn the processor will pay more to the farmers who supply the First Milk and South Caernarfon Creameries for the milk that goes into this cheese.
The farmers will receive the base TSDG price, which is base on the cost of production and reviewed every six months, although they will not bt TSDG members.
Announcing the move, Tesco commercial director for fresh food and commodities Matt Simister said:
“Through the work that we have done in the TSDG, we can understand how difficult the current market conditions are for farmers, and as we head into the winter period, we have decided to extend its pioneering ways of working to other farmers who supply milk for cheese on a number of our most popular lines.
“By introducing a higher price, linked to our cost of production, customers can be confident that when they buy Tesco Standard Mild & Medium cheddar, Tesco Value and Standard Red Leicester and Double Gloucester cheese, all our producers have benefited from a fair price for their milk.”
“With nearly two-thirds of our own label yoghurts already sourced in Britain, from March 2016 all of Tesco standard brand yoghurts will be made with British milk, helping to increase the demand for British milk for farms across the UK,” he said.
Tesco has also promised to label all fresh milk sold in its One Stop stores with a Red Tractor logo from 1 December 2015 and to ensure all country of origin labels on cheese are clear and only specify one origin.
Mr Simister added: “British farmers deliver some of the highest standards of milk quality in the world and some of the best conditions for animal welfare.
"It is a naturally healthy and nutrient rich product we can all be very proud of. Across the UK, customers tell us that they want to buy milk products from cows which are looked after properly – and they want the price that’s paid to producers to be fair.”
NFU dairy board vice chairman Michael Oakes said: “This is a significant move from Tesco, as it extends its Tesco Sustainable Dairy Group’s cost of production model to its entire British cheese supply base. This is on top of its move to 100 per cent British yogurt in March 2016.
“We are pleased that Tesco has recognised the challenging time the dairy industry is currently facing.
“This is especially welcome as we are heading towards the winter as farmers face significantly higher costs of production while cows are housed.
“This is the first retailer we have seen to make this move and this is a positive step given the current environment. Consumers have made it clear that they want to see a dairy sector that is sustainable in the long-term and all retailers need to be accountable for this.”
FFA chairman David Handley said the NFU and FFA had held positive talks with the retailer.
“We are pleased that it has listened to our very real concerns and is offering some kind of security for our struggling dairy industry.
“We need the processors to ensure they can pass on the benefits of this commitment back to our dairy farmers on the ground.”
An Adams Foods Spokesperson said: “Adams Foods is pleased to be supporting Tesco in its commitment to British dairy farmers through helping facilitate the Tesco Sustainable Dairy Group for cheese model (TSDG).
"Adams Foods in partnership with Tesco successfully established the TSDG model in 2013 for cheese supplied by Parkham Farms, the North Devon cheese maker. It was the first and, it is believed, still the only such cost of production based supply model for cheese in the UK."
The TDSG was the first, and remains the largest of the eight sustainable farming groups Tesco has created to support its farmers and growers.
The 600 farmers in it receive a price equivalent at to least the average cost of production, which is then fixed for six months, regardless of what happens in the market.
Tesco said the core principles of the TSDG are to:
• Have a transparent and clear pricing mechanism, using an independent cost tracker
• Pay a fair price for our milk and reward those who help us to deliver the best quality milk for our customers and the highest animal welfare standards
• Ensure that we have a sustainable approach to the dairy industry
Through the TSDG and its Dairy Centre of Excellence with Liverpool University, Tesco said it had invested £200 million into British dairy farming.