Liquid milk sector facing further instability due to plunging returns
The UK liquid milk sector is over-supplied and in a ‘precarious financial position’, a new report has suggested, with the lack of returns to processors and pressure on margins showing no sign of abating.
While uncertainty in the liquid milk sector was not a new phenomenon, the combination of declining milk consumption, lower retail prices and too much volume sold at marginal, or non-competitive pricing, placed the sector in a compromised position, warned Kite Consulting.
Average retail prices had fallen by 21% from about £1.39 to £1.10 for a standard four-pint bottle of own-label milk between 2013 and 2019, said Kite’s report, The Future of the Liquid Milk Sector. At the same time, consumption of liquid milk had fallen by 26% since 1998, with too many processing plants ageing and underinvested.
This meant there was little chance medium-sized operators would have the finances to grow into a major ‘Champions League’ milk supplier to the mults such as Müller or Arla, the report suggested.
There was also a danger the sector was entering a ‘last man standing’ scenario, it warned, where businesses operated in the belief a rival would exit the industry before themselves. And with an increasing amount of volume traded at marginal prices, there was a fear this would become the major driver for the industry, making it ‘very difficult’ for the sector to become profitable and sustainable in the long term.
Source: https://www.thegrocer.co.uk/dairy/liquid-milk-sector-facing-further-instability-due-to-plunging-returns/594731.article


