Tesco has announced that its dedicated milk pool will be used to supply its fresh cream and milk brands Creamfields and Pure. Until now, the milk coming from Tesco's 800 dedicated farmers was only used for its standard own-label milk. As its supply has expanded by 5.8% over the past 12 months, Tesco doesn't need to recruit any more farmers: the extra milk will be sourced from its current core and balancing suppliers. Tesco estimates that for next year, Pure and Creamfields will require around 107m litres.
Tesco also announced that because of the recent rises in input costs, it will review with Promar the price it pays to its dedicated farmers in January. It is an exceptional decision and there are no fundamental changes to the tracker mechanism itself or the six-monthly review.
Tesco's announcement shows that the type of contract available from Tesco helps to increase farmers' confidence and results in them expanding milk production: the 5.8% growth quoted for the last 12 months is much higher than the UK national average of 2.2%. With this extra milk coming from dedicated suppliers, Tesco had the option to either reduce the number of its farmer suppliers or find another outlet for it. It chose the latter which is to the benefit of farmers but raises the question of what happens in the longer term if farmers continue to expand.