Dairy giant reveals plans to invest £100m

Projects will include installing new filling lines and upgrading the capacity of existing production facilities, the company said
Projects will include installing new filling lines and upgrading the capacity of existing production facilities, the company said

Dairy manufacturing giant Muller has announced plans to invest £100 million over the next 18 months to grow the company's dairy businesses.

Projects will include installing new filling lines and upgrading the capacity of existing production facilities, the company said.

"The Muller brand is already ahead of Coca-Cola and Cadbury’s Dairy Milk in the top 10 most purchased fast moving consumer goods brands in the UK, picked from supermarket shelves 207 million times each year,” said Ronald Kers, Muller Group Chief Executive.

The announcement comes as dairy farmers' net profits have fallen by around 25% in the year to March and could fall further this year, say farm accountants.

Although there are signs of an uplift in milk price, producers should not expect a rapid improvement in profitability in 2016/17, warned Andrew Vickery, head of rural services at Old Mill.

"At the start of the 2015/16 milk year prices were in the high 20s – even if they improve by 4p/litre the 2016/17 average may not look any better.

"And while cereal feed prices remain low, the weaker pound is making imports; particularly of proteins like soya, more expensive.

"Many people have survived the troughs and will come out with a leaner, more efficient business that will make good profits in the future," says Mr Vickery.

'Insult to the suppliers'

Mr Kers said Muller wants to use their position in dairy to
Mr Kers said Muller wants to use their position in dairy to 'rev up' the engine

The company was recently criticised by the National Farmers' Union for their decision to hold its liquid milk price for September.

They were calling on Muller to explain why the company is not increasing it in line with 'extremely positive' market signals for UK milk prices to its suppliers.

"The decision is an insult to its suppliers and is completely out of line with recent positive market movements which are bringing some confidence to the industry at last.

"I’m sincerely hoping that Müller isn’t hiding behind the retail supplements paid by Lidl, Aldi and Morrisons, rather than reacting to the market realities we are seeing in cream incomes, wholesale prices and volume reductions.

"Cream incomes to a liquid retailer have increased by a whopping 77% since Müller last increased its base price and current daily deliveries of milk are down 10.2% on this time last year.

"This stand on milk price also makes a mockery of the support retailers gave, and continue to give, dairy farmers in minimum farmgate pricing.

"And the impact is wider than Müller suppliers – the Müller base price is frequently used in the unacceptable practice of basket pricing – where other processors pay their suppliers based on an average basket pricing mechanism – regardless of whether the end markets are the same.

"Müller is throwing its support to the British team at this year’s Olympics and it’s about time it showed similar support to its non-aligned farmers who deserve improved milk prices.”

Untapped potential

Mr Kers said Muller wants to use their position in dairy to 'rev up' the engine and work collaboratively with customers to realise untapped potential.

This potential reinvigoration of a category valued at £3.3bn per annum but in decline by 2% value year on year would represent a major turnaround, and according to Dan Howell, Commercial Director of Muller Milk & Ingredients (MMI), Müller is impatient to take this challenge on.

"By working closely with our customers to deliver products which tap into the aspirations of our consumers, we can increase the size of this category in 2020 by up to 14% compared to its current value.

"We are very excited by the strategic customer partnerships we are developing which will lead to long-term growth and value creation.

“Milk plays the central role in the dairy category. It’s the core driver of both penetration and frequency, bringing shoppers into the aisle to select the rest of their dairy produce.

"It’s also of huge importance to the UK diet and is rightly viewed as a beacon of healthy, refreshing, enjoyable nutrition," Mr Kers concluded.