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David Hughes, professor of food marketing at Imperial College.
Any Muller supplier hoping that the Dairy Crest purchase might give them a higher milk price will be disappointed, however. “Liquid milk is horrendously competitive,” said Mr McInnes. “We need to be a low cost operation and we need the milk price to be in line with the market.” That was pretty much code for whatever Arla pays, Muller will pay.
More volatility mitigation schemes are required for the future… Although the purchase would take out cost from the liquid supply chain it would do little to reduce volatility. Milk pricing models that strive to mitigate it are non-existent in the
UK, but Glanbia has had a volatility mitigation scheme running since 2011, said Sean Molloy, director of strategy at Glanbia Ingredients Ireland. Its Margin Protection Programme has seen 1bn litres successfully marketed since then and now about 40% of Glanbia’s 4800 farmers are opting to put 30% of their milk volumes through the programme. It works on a three-year cycle, with Glanbia setting a reasonable base price plus sustainable margin for its farmers. Its customers then buy into the scheme to get a predictable stable price too. There is also a market adjuster mechanism built- in to cater for what happens when the market increases or decreases significantly.
Put your crash hats on you’re in for a bumpy ride…
David Hughes, professor of food marketing at Imperial College, had his own unique take on the prospects: “There is an exciting future for dairying, but buckle up your seat belts and put your crash hats on – you’re in for a bumpy ride!” he said. The short-term prospects weren’t good as the world is going through an unstable phase and demand for premium products such as dairy in developing markets is also becoming unstable,” he added.
In the UK there would continue to be “tough trucking” for retailers and the market would be “very, very tough for the next five years”.
Sean Molloy, director of strategy at Glanbia Ingredients Ireland.
“But in a tough market we have to try harder than ever with product development, brands and education of the public.” He stated that the industry had to celebrate the purity and simplicity of dairy products. “In the long-term the key trends in food nutrition and health align themselves in favour of dairy products,” he concluded.
Promotion key to the industry’s success Meanwhile, David Dobbin, boss of Northern Ireland’s United Dairy Farmers co-operative and chairman of Dairy UK said the UK dairy industry needed to take control of its own destiny. “Our industry’s problems are down to global oversupply and we need to
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