Arla Foods UK confirmed that Tesco has made the decision to award a significant volume of Arla’s fresh liquid milk business to Müller.
Tesco said that it intends to continue leading the industry by developing incentives for farmers who are focused on delivering quality and value for customers, whilst driving up and maintaining the highest level of animal health and welfare standards.
Tesco commercial director for fresh food, Matt Simister said, “Developing trusted, long-term partnerships with our suppliers is central to providing the best quality for our customers. Tesco has a proud history of supporting British dairy farmers and this agreement with Müller Milk & Ingredients will create the most sustainable, progressive and customer-focused partnership in the dairy industry.”
Building on more than 20-year relationship
MD of Müller Milk & Ingredients Andrew McInnes added, “Our fresh milk and ingredients business has been a key supplier to Tesco since 1993 and we are delighted to build on this long term partnership.
“We aim to be the buyer of choice for dairy farmers and the supplier of choice to customers. We can only achieve this if we work collaboratively to deliver a compelling proposition at every stage in the supply chain.”
“Farmers can be assured that we are committed to offering a leading standard milk price and contract proposition as well as supporting our retailer customers who wish to develop farmer supply groups with whom they can build closer relationships. We stand by our record and will continue to look for ways to become more efficient and to add more value to the milk that we buy so that we become less reliant on volatile commodity markets,” McInnes stated.
David Herdman, chairman of Müller Direct Milk, which represents ex-Dairy Crest farmers said, “The Müller approach is to find supply chain solutions which work for farmers and for retailers. They are focusing on bringing a new approach which adds value and reduces costs in their network and should lead to a more sustainable fresh milk business. This extended partnership with Tesco is a sign of confidence in what Müller seeks to achieve and we welcome this.”
Arla still in Tesco plans
In spite of the change to Müller, Tesco said that it will maintain its long-standing relationship with Arla. Through the partnership, Arla and Tesco will continue to work together on the Tesco Sustainable Dairy Group (TSDG).
Peter Giørtz-Carlsen, executive vice president, Arla Foods UK, said, “While Arla is disappointed with the loss; Tesco continues to be an important and strategic customer. We have successfully strengthened the Arla business in 2015 through significant own label and branded volume growth in all categories as well as cost improvements. We are prepared and fit to meet the challenging market conditions.
“Arla is continually working on creating value in all dairy categories. This work has enabled Arla to strengthen its position as a leading dairy company in the UK and it will be building on this success in the coming year.”
Will Hosford, chairman of the Arla TSDG, and Arla farmer owner added, “As a farmer-owned business, our priority is our farmers and we are working with them to mitigate the impact of this decision on our business. Market conditions are extremely tough at the moment and consequently Arla is considering the changes that it will need to make to address this difficult situation.”