GERMANY’s Muller increased its grip on the UK dairy market with an £80m deal to buy some of the operations of Cathedral City maker Dairy Crest
The yoghurt maker, which operates as Muller Wiseman Dairies in the UK following its acquisition of Robert Wiseman in 2012, is set to acquire four dairy sites and 72 depots, as well as the flavoured milk brand Frijj.
The move, which is subject to competition clearance, will allow Dairy Crest to focus on its cheese and spread operations, which include leading supermarket brands Clover and Country Life.
Muller UK employs 6,000 people across four businesses, with Muller Wiseman operating six dairies from Bridgwater in Somerset to Aberdeen as well as a fresh milk distribution network in the UK. The company buys milk from more than 1,200 British dairy farmers.
Muller UK employs around 150 people at its depot in Leeds.
Dairy Crest’s dairies operations process and deliver around 1.3 billion litres of milk a year to major retailers, plus smaller retailers, coffee shops, hospitals, and residential customers.
The sale was announced as Surrey-based Dairy Crest reported a 95 per cent slide in half-year profits to £900,000, dragged down by volatile milk prices and the cost of plant closures.
Revenues rose one per cent to £682.1m.
The sale includes factories in Foston, Chadwell Heath and Severnside as well as the Hanworth glass bottling site, where Dairy Crest is already consulting with employees about the site’s future.
Dairy Crest chief executive Mark Allen said: “Completing this transaction would be a positive development for Dairy Crest and for the UK dairy industry.
“The combination of our dairies operations with those of Muller Wiseman Dairies will create efficiencies and economies of scale that will help to create a more sustainable UK dairy sector that is better placed to compete on the global stage.”
Muller said the combination will lead to production efficiencies, and unlock the potential for higher levels of innovation, product development and greater exports of dairy products made in Britain.
Ronald Kers, chief executive of Muller UK & Ireland, said: “We are concerned that the dynamics of the UK fresh milk market are unsustainable for dairy processors in the mid to long term, and this acquisition will allow us to reduce our costs, increase our efficiencies and invest in the future.”
“The deal will reduce net debt and unshackle the high-quality foods business from a resource drain, sharpening focus, which could warrant a modest re-rating,” analyst at Jefferies said in a note.
A recent poll indicates that many dairy farmers are still expecting to increase production in the long term, despite volatile milk prices.
The poll, carried out by agricultural consultants Promar, found that 96 per cent of farmers surveyed expected to have more cows within the next three years. More than 40 per cent expected to increase herd size significantly, with plans for at least 50 per cent more cows.
Longer term, the prospects for UK dairy farmers remain favourable, according to the National Farmers’ Union (NFU), with global demand predicted to grow two per cent a year for the next decade.