Tim Smiddy, managing director of Crediton Dairy said, “I am pleased to be able to report that the business performed in line with our expectations financially, operationally and commercially.
“During the year, we invested further in our dairy’s production capacity and capabilities; strengthened our new product development pipeline; and continued to focus on enhancing our customer service, product quality and production efficiencies. As a result, we are continuing to make good progress towards our strategic objective of becoming a leading supplier of both branded and own-label, added value, dairy drinks and milks.”
Turnover grew by £1.2m/$1.5m (+1.8%), driven primarily by improved product mix (with higher sales of added value dairy drinks particularly iced coffee, lactose-free milk & a2 milk) and higher overall sales volumes partially offset by dairy market deflation (especially bulk cream).
Profitability improved in 2018 with key drivers being an improvement in product mix (led in particular by increased sales Crediton Dairy’s brands, Arctic Iced Coffee and Moo Milk) partially offset by higher milk costs, lower bulk cream returns and currency-based cost inflation driven by a weaker sterling/euro exchange rate.
Crediton Dairy saw another year of growth in its core extended shelf life dairy drinks business. Sales volumes of retail own-label flavored milks and the Moo brand continued to grow and these were complemented by the launch of added value white milk products during the year including lactose-free milk & a2 milk.
Crediton’s Iced Coffee drinks business continued to grow, driven mainly by the listing of Arctic Coffee in major multiple and convenience retailers during the year. Own-label Iced Coffee drinks also performed very well with the listing of new products and wider store distribution, the company said. This growth is continuing in the current financial year with Arctic Iced Coffee being the fastest growing major iced coffee brand with value sales +173% year on year.
Investment
Crediton Dairy undertook further capital investment of £1.8m ($2.2m) in 2018 to support the strategic drive to develop an added value dairy drinks business. Expenditure on capital investment was higher in 2018 than the previous year due to a combination of investment in new CIP systems, additional milk silos, lactose-free milk processing capability and enhancing site services.
Having invested more than £14m ($17m) since the management buy out in 2013, Crediton Dairy has commenced the next major phase of capital investment to deliver growth in added value milk drinks. A further investment of £12m ($14.5m) is being made in the current financial year to increase the capacity and capability at the dairy. The investment program will include building a second filling hall and additional processing and filling capability.
Crediton Dairy commenced recruiting farmers to supply the dairy in the fall of 2013. At the year-end, 65 farmers were supplying Crediton Dairy, nearly all of whom farm within 25 miles of the dairy. The group of local dairy farmers produce an annualized volume of 100m liters of farm-assured milk enabling Crediton to be self-sufficient in the supply of raw milk.
Given the volatility of dairy markets in recent years, Crediton Dairy launched a Fixed Milk Price Scheme from October 2017, through which farmers could receive a fixed price of 28 pence per liter for two years for up to 30% of their Base Milk Volume. Some of Crediton’s larger farmer suppliers took up the option to fix the price for a volume of their milk. Another Fixed Milk Price Scheme will be put in place from October 2019, which will be backed by sales of finished product to a major retail customer.
Smiddy said, “The £12m investment we are currently undertaking at the dairy will increase our added value processing capacity and capability. It will allow us to develop further an exciting range of new branded and own-label products that meet growing consumer demand. In doing so, it will play a key role in driving forward our strategy of being an innovative, highly efficient and flexible added value milk and dairy drinks business.”