First Milk announces 'turnaround plan' amid market difficulties

Over the past nine months, First Milk and its farmer members have been impacted heavily by the unprecedented challenges facing the dairy industry.

Since his appointment a month ago, First Milk’s new CEO, Mike Gallacher, has been working with the Board and Executive teams to develop a turnaround plan for First Milk with the goal of providing a better return to farmer members.

First Milk has announced a series of changes including a programme of significant cost reductions and a new approach to milk pricing.

In March, the NFU said it sought urgent talks with Gallacher after being appointed as CEO.

The union said First Milk members were shocked at the forecast milk price set for April under their new A and B pricing model and the it was concerned that some are already questioning their future in the industry as a result.

Additionally, Sir Jim Paice, chairman of First Milk, today announced that an independent review will be conducted of the governance and commercial learnings from the business’s recent disappointing performance.

Modelled on the recent Myners review of the Coop, this review will seek to identify clear recommendations which will be shared with members by summer 2015.

But NFU Cymru Milk Board Chairman Aled Jones said, in March: "Their members will be feeling continued frustration with First Milk with this announcement of shockingly low prices for both the ‘A’ and ‘B’ volumes. Put simply, this is a price cut masquerading as a new pricing model. We have seen positive signals recently and this needs to feedback onto farm urgently."

The collapse of dairy markets and the significant increase in milk volumes during 2014/15 exposed weaknesses in First Milk’s existing milk pricing system. From 1st June 2015, pricing will be based on net commercial returns from First Milk’s manufacturing sites and customers.

First Milk have said they will also be looking at a wide range of opportunities to reduce costs and improve business efficiencies.

At meetings held at First Milk sites today, a proposal to remove up to 70 job roles from the business was communicated to employees.

Mike Gallacher, CEO, said: “None of the decisions announced today have been taken lightly, but they are necessary steps in the process of rebuilding a secure and stable future for First Milk, its members and its employees. As a team, our aim will be to provide every support for those impacted in the coming months.

“First Milk plays an important role in many rural communities across the UK and continues to value the support it has received from all our stakeholders. Our strategy is aimed at continuing to restore the health of First Milk so that we can support those communities through delivering better prices for their milk.”

Mike Gallacher will be explaining the detail of the turnaround plan to First Milk’s members at meetings scheduled during the first two weeks of May.