Farm Ireland

Friday 20 April 2018

Glanbia facing a hard sell on supplier loyalty scheme

'Mixed to bad' reaction from farmers to 31c/l fixed milk price offer

Farmers have expressed serious misgivings about the fixed milk price element
Farmers have expressed serious misgivings about the fixed milk price element

Glanbia is facing an uphill battle to sell its new loyalty scheme to the company's 4,600 milk suppliers.

Reaction from Glanbia's dairy farmers to the scheme has been described as "mixed to bad", with farmers expressing serious misgivings that the fixed milk price element is tied to feed purchases from the group.

Under the scheme Glanbia announced a five-year fixed milk price of 31c/l including VAT and a €30 per tonne loyalty bonus on concentrate dairy feeds from GAIN Animal Nutrition products.

Controversially, Glanbia has stated that suppliers who commit to purchasing their feed from the processor will be given priority access to the fixed milk price strand of the package.

This move has provoked heavy criticism from the farm organisations.

A number of Glanbia suppliers contacted said they wouldn't apply for the scheme.

The farmers pointed out their feed suppliers were generally €15-20/t cheaper than the best prices available from Glanbia.

Management at Glanbia are due to meet with an ICMSA delegation tomorrow to discuss the loyalty package.

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The dairy processor met with the IFA dairy committee last week, with the farm organisation reiterating their misgiving regarding the scheme.

While accepting that the five-year fixed milk price contract was another important effort to help farmers manage their milk price risk and the firm have been innovative, the IFA dairy chairman Sean O'Leary said giving preferential access based on links with feed purchases from Glanbia was objectionable and potentially anti-competitive.

Glanbia has argued that the loyalty scheme offered the processor's customers unrivalled traceability.

"The establishment of this cohort of farmers allows Glanbia Ireland promote the 'closed loop' procurement concept in terms of product claims and marketing initiatives," Glanbia's Sean Molloy claimed.

However, the IFA rejected this assertion. Mr O'Leary pointed out that the vast bulk of the country's compound feed suppliers were independently accredited and qualified for existing quality assurance schemes.

The ICMSA's John Comer said farmers had "genuinely serious reservations" which needed to be addressed. "Farmers are concerned they could be tied into an uncompetitive feed price," he said. "We think that priority status for the feed scheme should be dropped."

With application forms due to issue in the coming weeks, a Glanbia spokesman said there has been a "high level of interest" with the feed element attracting the most questions.

"The scheme rewards loyal customers who commit to supply their milk and purchase their dairy feed from Glanbia Ireland. As majority owners of the business, farmers will share in the benefits of increased loyalty to the organisation."

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