Dairy Crest Passes Rising Milk Costs on to Customers

Cheese and milk producer Dairy Crest is continuing to pass on higher milk costs to customers as inflationary pressure showed no signs of abating.

The group said yesterday that sales in its dairies division rose five per cent during the three months to June 30, “principally reflecting the impact of price increases to recover higher raw milk and commodity costs”.

Sales at Dairy Crest’s foods division – its products include Cathedral City cheddar, Country Life butter and Utterly Butterly spread – were 14 per cent ahead during the quarter, driven by “strong” growth as well as price rises.

The Surrey-based firm said sales of Cathedral City were now pounds 173 million a year – up 15 per cent from January – cementing its position as the UK’s biggest cheese brand.

Last year the group passed on a 35 per cent rise in milk costs to customers as farmers were hit by higher fuel and feed costs.

Dairy Crest, whose customers include the “big four” retailers of Tesco, Asda, Sainsbury’s and Morrisons, said it had paid a premium of 0.3p per litre to all its dairy farmers since the start of June thanks to higher prices paid by Morrisons.

“UK production levels remain very tight and farmers are facing further rises in on-farm costs,” it added.

The higher milk prices saw underlying volumes at the group’s doorstep milk delivery business, Express Dairies, worsen “slightly”.

Delivered milk prices have risen from around 53p a pint to between 55p and 59p a pint since last September, with prices for its cheese and spreads also up amid annual dairy inflation of more than 13 per cent. But nonmilk product delivery sales were up year on year, the group said.

Dairy Crest said it was extending its “milk&more” internet delivery service, with the majority of its 160 depots now allowing customers to order milk and other products such as organic vegetables, bread and fruit juice.

The initiative is trying to revive the doorstep delivery business, which has around 1.5 million customers but has experienced a seven per cent decline in milk volumes over the year.

Broker Panmure Gordon said Dairy Crest’s statement confirmed “a good start to the current year, underpinned by strong brand performances, continued price rises and cost savings.”

The broker said: “While the trading environment remains challenging, we believe that the business is well placed to mitigate these effects.”

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