Overheads Force a Rise in Milk Price

By David Wilcock

Supermarket milk supplier Robert Wiseman Dairies yesterday said it had begun increasing prices to try and offset “exceptional” cost rises.

The Glasgow-based group, which supplies Tesco and Sainsbury’s, said overheads were rising across its supply chain, ranging from increased feed costs faced by milk suppliers through to higher packaging and oil-related costs.

It warned in January it would review prices if these pressures continued.

But it said its new multi-million-pound dairy in Bridgwater was “building steadily”.

The company said in a statement: “We have begun implementing higher selling prices to cover these cost increases, which will also allow an increase in the price paid to our milk suppliers.” Wiseman did not offer details of the price rises.

Earlier this year, the company said the price it paid to farmers had gone up by more than a third over the past 12 months. Customers have been handed virtually all of these increases.

The price update came as Wiseman said volumes and turnover for the year to March 29 were in line with forecast. It has benefited from a pounds2 million advertising drive behind low-fat product the One, which has grown sales by 34 per cent year-on-year.

Production at the company’s new South West dairy at Bridgwater, Somerset, is also building steadily, although it said delays by contractors meant commissioning of a third and final filling line on site was not expected until late May.

This will result in extra costs of pounds1 million in the first quarter of the new financial year, as planned cost savings will not be achieved until the end of June.

“We remain confident that with production at our Bridgwater dairy well underway, we are in excellent shape going forward to further develop the business,” the firm said.

“Production at Bridgwater is increasing steadily and we have received approval from all our major own label customers to process and pack for them at this dairy.

“Our revised estimate of the non-recurring revenue costs of commencing operations at Bridgwater in the second half year is up pounds200,000 to pounds1.7 million.

“Due to contractors running behind schedule, we do not anticipate full commissioning of the third and final filling line of phase one until late May 2008.

“This slight delay will result in extra costs of pounds1 million in the first quarter of the new financial year, as all the planned synergies will not now be achieved until the end of June 2008.”

Robert Wiseman operates other dairies in Aberdeen, East Kilbride, Glasgow, Manchester, Droitwich Spa and Okehampton in Devon. The news comes the day after it announced it was consulting over plans to end milk production at its base in Pensilva, Cornwall. The move would mean the loss of 56 jobs, though 77 would remain at the distribution centre on site.

dwilcock@westernmorningnews.co.uk

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