DairyCo Company Strategy and Performance report

Published 23 October 09

Increasing interest in the forthcoming DairyCo report has thrown up some inaccuracies regarding the scope of the report and why and when it was commissioned.  We believe it is extremely important to ensure that industry expectations are accurate and therefore we would like to clarify the following points.

When and why was the report commissioned?

The need for this report was conceived by the now defunct Milk Development Council and first referred to in its 2007-10 Corporate Plan.  Ken Boyns, Director of DairyCo, in his then role as Head of Market Intelligence of the MDC, identified growing farmer interest in the need for an independent, non-political document on the strategy and performance of milk buyers, highlighting the strengths and potential weaknesses of their businesses in order that famers could make informed business decisions.

The report was not commissioned at that time but was included as part of the DairyCo business plan in 2008 and also supported by the NFU's 2009 Survival Plan for the Dairy Industry.

Work on the report began within DairyCo earlier this year and the subsequent demise of Dairy Farmers of Britain further highlighted the importance for farmers of this independent evaluation.

What is the scope of the report and which companies will it include?

The aim of this comprehensive project from a farmer's perspective is threefold:

  • What is the potential for my milk buyer in terms of milk price and security of milk demand?
  • What is the long-term strategy of my milk buyer and how can I best structure my dairy enterprise to fit in with that strategy?
  • How is the company performing against this strategy?

The report is not intended to promote one milk buyer over another, nor create any kind of ranking of who would be the preferred buyer in any geographical area, but to provide impartial and accurate information on the companies reviewed to aid farmers in their decision making.

Companies included in this report were selected purely on the volume of milk purchased from farmers in the 2007/08 milk year (excluding Dairy Farmers of Britain).  There was a natural cut off point between the seventh and eighth largest milk buyer.  This resulted in the following companies being included in the report:

  • First Milk
  • Dairy Crest
  • Arla
  • Milk Link
  • Robert Wiseman Dairies
  • Meadow Foods
  • Müller

It is important to note, this is not expected to be a one-off report as it will need to be updated to reflect the changing dairy industry.  It is hoped that the scope will be widened to include a greater range of milk buyers in future.

What aspects of the businesses will the report examine and not examine?

It is proposed that the report covers the following sections for each dairy company:

Financial information; to include income, balance sheet, cash flow statements, standard financial ratios, investment record, ownership, profitability and milk price.

  • Milk supply; looking at milk requirements, regions collected from, transport factors.
  • Processing; to include capacity and location, efficiency, joint ventures and opportunities.
  • Marketing; to include product portfolios, security of markets accessed, brands and innovation.
  • Strategy; looking at long term aims, underlying short term goals and rate of progress towards these goals/aims and potential to generate profits.

As well as using information already in the public domain and held by DairyCo, much of this information will be gained from discussions with the companies.

Who is undertaking the work to produce the report?

Following a competitive tender process, which attracted a high number of responses, Bidwells Agribusiness was awarded the tender.  They were selected based on their strong analytical skills and wide ranging experience and knowledge in the agricultural sector.

When will the report be issued?

Work has already begun on the project and a finished report is due to be published early in the New Year.

After receiving the final report from Bidwells, and before publication, DairyCo will discuss the findings with each company involved to ensure accuracy and to avoid misinterpretation.

Ends

23 October 2010

 

 

For further information:

N:        Philippa Stagg

T:        02476 478693

E:        philippa.stagg@dairyco.org.uk