Tesco Blow Halves Profits at Milk Firm Dairy Crest

By Rachel Stevenson

Profits at Dairy Crest almost halved in the first half of its financial year after the group lost a key contract to supply milk to Tesco, but the company yesterday unveiled a major expansion into health- improving foods.

Drummond Hall, the chief executive of the company, said initial sales of its ‘Clever Milk’ ” a milk enriched with Omega 3 fatty acids that are thought to help fight heart disease and boost brain function ” were going well. Professor Robert Winston, the nutrition expert from Imperial College, London, is endorsing the product.

The company is also about to launch an Omega 3-enriched St Ivel Gold spread. It will go on sale in January, and the company hopes it will add to the already strong growth in the healthy spreads market. Dairy Crest said there was growth of 10 per cent in this sector in the six months to the end of September. This compares with 3 per cent growth in the butter and spreads market as a whole. ‘The sectors of strongest growth continue to be spreadable butter and health, with growth of 11 per cent and 10 per cent respectively by value, where we are currently underrepresented but where we see a significant future for the group,’ Mr Hall said.

Dairy Crest also said sales of its organic milk brands had soared during the six months to the end of September. Total sales of its organic milk products grew 50 per cent in the period. This, and strong sales of its Cathedral City cheese brand, helped lift revenues by 2 per cent for the six months to pounds 642m.

The move into health-improving milk and spreads builds on Dairy Crest’s launch of probiotic products, which contain so-called ‘friendly bacteria’ to improve the consumer’s health. It now sells a probiotic yoghurt drink for children under the Petits Filous brand. Sales of Petits Filous were up 24 per cent in the period.

Pre-tax profits for the six months to end-September fell to pounds 17m from pounds 32m, the com-pany said. It had already warned that first half profits would be ‘significantly lower’ than the same period last year after it lost the 170 million-litre-a-year milk contract with Tesco.

But Mr Hall said Dairy Crest had since won a new contract with Morrison’s supermarket, and the group was now processing more milk than before it lost the Tesco contract. In May, the group bought the Midlands Co-Op Dairy and Starcross Foods, a dairy in Derbyshire.