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Tesco milk tender set to attract big players

Tesco's decision to put its own-brand milk supply contract for all its outlets in the South out to tender has provoked a flurry of activity in the liquid milk sector.

The lucrative 25m litre contract, which is worth an estimated €12-13m, is certain to attract interest from current suppliers such as Glanbia and Connacht Gold.

Co-ops have been heavily criticised in the past by liquid producers for undercutting one another to secure supermarket contracts. Farmers argue that the process has led to reduced margins for dairies and lower prices for farmers.

Meanwhile, a decision by the Competition Authority on Connacht Gold's purchase of Donegal Creameries' dairy business is expected by the end of the week.

The deal, which was agreed at the end of October, saw Connacht Gold agree to pay €13.5m in cash for the businesses, with further payments of up to €7.4m dependent on the performance of the milk business. The deal involved Donegal Creameries' 120m litre milk pool, the liquid milk processing facility at Killygordon and their retail business in Donegal and Northern Ireland.

Continued competition between Lakeland Dairies and Donegal for suppliers in the North has resulted in Lakelands paying up to 32.13p/l for milk in November, while Donegal paid up to 30.56p/l.

Staying in the North, the recent announcement by Ballyrashane Co-op that it was pulling out from the auction from next year has caused a stir. The Coleraine, Co Derry, dairy is to return to sourcing milk directly from its own members.

Indo Farming