Dairy Crest pledges to fight back in milk market

UK food producer Dairy Crest set its sights on improving the profitability of its milk business today as it unveiled a 10% rise in first half profits.

The group, whose brands include St Ivel Gold, Country Life butter and flavoured milk drink Frijj, recently lost deals to supply Asda and Tesco after a review by the supermarkets.

It said its priority was now to to replace the lost business, and that discussions were continuing with a number of other customers over new supply proposals.

Profits before tax, exceptionals and goodwill rose to £38.8m (€55.8m) in the six months to September 30, in line with the group’s expectations.

Chief executive Drummond Hall said: “Dairy Crest has delivered a solid first half with results in line with expectations across all of our businesses and we continue to be encouraged by the performance of our major brands.”

Although the milk business had a good first half with fresh milk volumes to major retailers 6% higher, the loss of supermarket business is set to hit the division in the second half.

Tesco announced in August that it would no longer take Dairy Crest’s milk from the first quarter of 2005, while Asda saw a similar change come into force this month.

Dairy Crest said its spreads business, which accounts for the most profits and includes the Clover and Utterly Butterly brands, continued to perform well.

Its major brands strengthened their market position despite a slight decline in the general butter and spreads market.

There was also evidence of a turnaround at St Ivel following a relaunch.

The group’s Yoplait brands, which include Yop yoghurt drink, continued to show good growth, with volumes of Yop 34% higher.

Dairy Crest recently paid £4m (€5.8m) for full control of the company that makes Country Life butter.

It said today that the deal with Associated Co-operative Creameries to acquire its 38% holding in the English Butter Marketing Company would allow it to speed up the development of the brand.