Who holds the power in UK dairy?

The UK dairy industry is big business. Together, the annual revenues of the UK’s 15 largest dairy companies come to around £11bn. Grocery sales alone are huge. Milk, yoghurt, cheese, butter & spreads and dairy drinks were worth more than £10bn last year in total – dwarfing other mega-categories such as bagged snacks, confectionery and frozen food.

Things look set to get even bigger. UK dairy has been subject to a series of M&A deals over the past year coupled with a glut of major investments – meaning prospects are looking up. At least, “for the companies who can afford to invest”, says Dale Farm CEO Nick Whelan.

So, which companies are those? Who holds the most power in the UK dairy industry? And how much are these businesses worth?

We’ve put together a list of the top 15 players (overleaf), based on a simple methodology, ranking businesses according to UK turnover from their most recent accounts at Companies House. This means global businesses that don’t file UK accounts, such as ice cream powerhouse Unilever and Alpro owner Danone, are not included.

Even without their inclusion, it’s clear the UK dairy sector has become “even more polarised towards the bigger players” over the past five years, as one City source puts it.

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Those bigger players now look well established. After several noteworthy deals over the past 12 months, the spate of major M&A among the sector’s big cheeses “is largely done”, predicts Garyth Stone, MD for investment bank Houlihan Lokey’s consumer group.

The UK’s “highly consolidated” dairy sector no longer has “many other sizeable businesses to sell”, says Stone, who has worked on the majority of the sector’s big M&A deals over the past two decades.

“There’s a limited amount the likes of either Arla or Müller can now do in the UK. Arla would have antitrust issues with any big purchase, while Müller would like a cheese business but it isn’t obvious how.”

Dealmakers could instead switch their focus to smaller suppliers outside the top 15, such as The Collective and Wyke Farms, Stone forecasts. Meanwhile, mainly B2B operators such as Meadow Foods and First Milk will always have third parties curious about their future prospects.

Other “perennially attractive” businesses that could also be of interest include Joseph Heler, Rodda’s, Biotiful Gut Health and Yeo Valley (which does make the top 15), the City source suggests.

The appeal of all of these businesses is a “strong USP” – be it an attractive brand identity, a well-invested manufacturing base, strong provenance credentials and a solid customer base, or a combination of all four – the source says.

“It’s inevitable in a mature market segment – particularly for those in the middle ground – that without that USP, you will struggle.”

UK dairy is “such a hard industry to make any money from,” the City source adds. Indeed, in an NFU survey last year, 10% of a rapidly ageing population of dairy farmers said they planned to exit milk production within the next two years.

“Success in this industry is ultimately all about giving yourself as many choices as possible to find markets for that dairy fat,” the source adds.

Having plenty of choices is why Arla announced a £300m investment in its manufacturing base this year, with a big move into mozzarella for export markets. It’s also why Müller acquired Yew Tree, which enabled it to move into dairy powder production –again, with a big focus on overseas customers.

Then there’s Dale Farm, which announced a record £70m investment in cheddar production in May. That will significantly increase production capacity, opening up new markets for Northern Irish cheddar.

Demand for UK dairy continues to grow globally, despite the volatility at home, Dale Farm’s Whelan points out. He’s feeling confident over the future direction of the business.

“We have been very focused on growing value for the past five or six years and quadrupled profits and doubled turnover,” he says. Part of that will be down to the impact of what Whelan describes as “constrained” supply, which has enabled processors to push through pricing measures. It’s also partly own to Dale Farm exiting underperforming categories such as yoghurt, and cutting costs.

But it’s not just about cost-cutting: Dale is planning another cash injection to fund large scale automation, digitisation and further productivity improvements.

Those who can’t make similar moves “will go backwards”, warns Whelan. “The industry is at a real fork in the road. Those who can afford to invest have a good chance, those who cannot could struggle.”

Read on for our list of the top 15 power players.

1. Arla Foods UK

Turnover: £3.0bn (+21.1%)
Operating profit: £29.9m
Year-end: 31 December 2022

After significant challenges during the pandemic, Arla returned to growth towards the end of its most recent statutory accounting period in 2022. Branded sales performed particularly strongly.

Its next set of statutory accounts – for 2023 – won’t be published until later this year, but financial updates show a continuation of the upward trend.

Revenues in 2023 are reported to have slipped to the £2.6bn mark, largely due to falls in farmgate prices from their previously record levels. However, the Lurpak owner’s brands have performed strongly, particularly in H2, as the easing of inflation helped grow volumes by 2.2% over the year. Arla Protein, Starbucks and Arla Pro were all standouts – up 66.4%, 26.2% and 8.5% in volume respectively.

Arla says it has carried that “positive momentum” into H1 of 2024, too. UK MD Bas Padberg points to strong volume-driven revenue growth, driven purely by incremental volume increases, rather than price hikes.

Key highlights of the past year include the launch of a squeezy variant of Anchor in May and the much-anticipated plant-based Lurpak in August.

In a busy 12 months of change for its manufacturing estate, Arla announced the closure of its Melton Mowbray creamery in Leicestershire in July, due to “a continuing decline” in the specialty cheese market.

But in other areas, it hasn’t shied away from spending big. In April, Arla snapped up dairy ingredients specialist Volac’s whey nutrition business.

This year has also seen Arla announce a major, £300m investment across five key manufacturing sites.

That includes £179m at Taw Valley in Devon – its largest-ever single investment in the UK – to turn the site into a mozzarella-producing hub for export markets. The project will play a crucial part in its plan to diversify outside its core own label and branded retail businesses, and add further value to its British milk to become a “global mozzarella player”.

As Padberg sums up, Arla’s “continuing investment” on these shores is a “huge statement of intent of our confidence in the UK market”.

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2. Müller UK & Ireland

Turnover: £2.3bn (+17.0%)
Operating profit: –£5.9m
Year-end: 31 December 2022

Müller’s £5.9m operating loss in 2022 – the only loss of its kind in this list – was driven by inflation. Cost of sales rose 29.7%, significantly higher than its increase in turnover, as the supplier faced challenges in yoghurt and liquid milk.

However, Müller says its 2023 accounts, due this autumn, will show a far stronger performance. That has been driven by a major brand refresh across yoghurts and a wealth of NPD. It will be further buoyed by securing the role of Sainsbury’s sole milk supplier, following the end of the retailer’s long-standing deal with Arla last year.

The two biggest pieces of news to emerge from the business in the past year focus on M&A. Müller shocked the dairy sector last December when it sold the loss-making, yet recently modernised, Milk & More to Freshways for a nominal sum.

The deal to offload its DTC business, largely credited with reviving the fortunes of the milkman, offered Milk & More “the means to further develop its proposition for customers”, it said. The fact it was “hugely cash-draining”, according to one City source, may offer further explanation.

But the deal to snap up Yew Tree Dairy – a business worth hundreds of millions of pounds in its own right – could be even more transformational. Yew Tree supplies milk and cream in the mid-market alongside its now main speciality of milk powder production. Once passed by the CMA, Müller says the deal will offer significant opportunities in export markets as it aims to become “a major producer and exporter of powdered milk products made in Britain, with British milk”.

3. Saputo Dairy UK

Turnover: £626.8m (+22.3%)
Operating profit: £38.6m
Year-end: 31 March 2023

Like so many of its rivals, Saputo saw a significant rebound in performance in 2023. That was buoyed by a return to form for market-leading cheddar brand Cathedral City, after an inflation-driven slowdown in sales during 2022.

The processor attributes its improved performance to “pricing actions” to recover rising production costs.

But that’s not all. Saputo has added a number of plant-based variants to Cathedral City since September 2022,

Cathedral City Our Plant Based now offers block, grated, sliced and spreadable variants and holds the second highest volume market share in the alt-cheese category, according to Saputo.

The dairy giant’s performance has also been boosted by strong demand for dairy cheddar and a wider international distribution for Cathedral City, which diversified into red leicester and smoked cheddar last year. The brand also returned to screens in May 2024 with a TV push that showcased its ability to “elevate” everyday cheese usage occasions.

Meanwhile, Saputo’s butters and spreads division, which includes Clover, Country Life and Vitalite, has also performed strongly, the supplier says, having capitalised on the returning popularity of marge-type spreads.

4. Dale Farm

Turnover: £631.4m (–13.2%)
Operating profit: £37.5m
Year-end: 31 March 2024

Dairy co-op Dale Farm has suffered a hit to revenues due to the easing of milk prices, plus the closure of its Rowan Glen and Kendal sites.

However, its turnover-to-profit ratio has increased as a result, helped by a recent focus on its core operations in cheese. Indeed, it announced a record £70m investment in cheese production at its Dunmanbridge facility in County Tyrone in May. The upgrade work marks one of the largest-ever single investments by a Northern Irish agri-food company.

Capacity is up, as a result, by 20,000 tonnes a year to 85,000 tonnes. That’s not the end of its spending, either. Dale Farm CEO Nick Whelan points to a fresh round of investment next year in automation, digitation and productivity improvements across the business.

5. Ornua (UK)

Turnover: £746m (+3.8%)
Operating profit: £20m
Year-end: 30 December 2023

Oruna’s UK operation represents a combination of the main Ornua Foods UK business – which owns Pilgrims Choice and sells own label cheese to the mults made by First Milk – alongside Ornua Ingredients Europe and Ornua Butter Trading UK.

Latest accounts for the division show a “stable” trading performance, based on “sustainable pricing structures with valued customers” in 2023, despite “continued inflationary pressures”.

Retail sales were supported by brand marketing activities such as Pilgrims Choice’s ‘Taste Matters’ campaign, which reached 20 million households. It highlighted the brand’s quality and flavour.

Multichannel Kerrygold campaigns, meanwhile, showed how the brand could pep up mealtimes.

Ornua Foods UK has also expanded into new formats in the past year. First came its Pilgrims Choice snack sticks in September 2023. Now Kerrygold is rolling out a butter sticks range this month in a “convenient 100g format” ideal for cooking.

Ornua has also invested in a new cheese packing facility at its HQ in Leek, Staffordshire, in the period – enhancing its packing capacity and capabilities.

6. Meadow

Turnover: £588.6m (+30.7%)
Operating profit: £27.5m
Year-end: 31 March 2023

Ingredients specialist Meadow returned to pre-Covid profit levels last year, helped by a strong plant-based sales. But plenty of other factors are at play. The shedding of its longer name – Meadow Foods – in November 2022 began a spate of activity.

Its main PE owner, Exponent, sold a “significant” stake to Canada’s Fairfax Financial Holdings last August, in a move that gave Meadow “the perfect partner for our future growth”.

Meadow also acquired food manufacturer Naked last summer, in a bid to bring the production of lines such as fruit preps for yoghurts in-house.

As part of a big push launched in 2023, Meadow’s mission statement is to “make sustainable ingredients easy for our customers”.

7. First Milk

Turnover: £476m (+4.4%)
Operating profit: £16.8m
Year-end: 31 March 2024

After a tricky period in the mid 2010s, First Milk has turned around its fortunes by focusing on B2B operations in cheese and dairy ingredients, together with Nestlé, Ornua and Arla Foods Ingredients.

It pivoted towards a regenerative agriculture production system at the turn of the decade, rebranding as ‘The Regenerative Co-op’ last year. In the same year, it also partnered with Yeo Valley to create the Naturally Better Dairy Group, founded on the principles of “nature-positive” regenerative production methods.

In February, First Milk acquired Dorset-based BV Dairy, which makes a host of products for the food manufacturing and foodservice sectors.

8. Lakeland Dairies (NI)

Turnover: £442.1m (–6%)
Operating profit: £385k
Year-end: 31 December 2022

Irish dairy giant Lakeland took its most recent form in 2019, when it merged with rival LacPatrick Dairies to create the largest cross-border dairy co-operative on the island of Ireland. Its annual milk pool spans two billion litres collected from 3,200 dairy farms.

The business runs major food ingredient and foodservice operations, in addition to several milk and butter ranges under the Lakeland brands and others such as Ballyrashane and Champion.

Lakeland runs three major processing sites in Northern Ireland – in Artigarvan, Ballyrashane and Newtownards – alongside a head office in Augher, County Tyrone.

9. Leprino UK

Turnover: £425.5m (+33.9%)
Operating profit: £30.3m
Year-end: 31 December 2022

US mozzarella & dairy ingredients specialist Leprino Foods completed its acquisition of Glanbia’s cheese operations in the UK and EU last year, renaming them in the process. In the UK, it became Leprino UK.

Leprino and Glanbia had worked together under a joint venture arrangement since 2000, turning the operation into a market-leading mozzarella player across Europe. It operates two sites in the UK: Llangefni, Wales and Magheralin, Northern Ireland.

In July, Leprino entered into a global partnership with Dutch plant-based business Fooditive, to produce non-animal casein made using its precision fermentation platform.

10. Freshways

Turnover: £347.5m (+38%)
Operating profit: £2.9m
Year-end: 31 December 2022

Freshways saw a “dramatic” swing back to profitability last year, as sales shot up by almost £100m. The supplier attributed its improved performance to cost increases and high growth in foodservice.

It snapped up Müller’s Milk & More last December in a shock deal, and has already started changing the business model to more value-orientated products.

This month, Freshways built on that deal with the purchase of Totally Welsh Dairy, whose bottling line in Pembrokeshire will service the DTC brand.

11. Froneri Ice Cream UK

Turnover: £321.9m (+5.1% )
Operating profit: £49.7m
Year-end: 31 December 2023

Froneri UK produces a range of own label and branded ice creams, desserts and lollies. Holding partnerships with both Nestlé and Mondelez, it manufactures the likes of Fab, Cadbury’s ice creams and Kelly’s of Cornwall.

Its latest accounts show an “excellent” performance despite the challenges of last year’s volatile weather, helped by “operational efficiency gains”. Highlights from this year include Jason ‘Aquaman’ Momoa promoting Nuii and a move into ice cream for Cadbury’s Caramilk.

12. Yeo Valley

Turnover: £315.9m (+22%)
Operating profit: £5.1m
Year-end: 28 May 2023

A slew of NPD and diversification outside of its yoghurt heartland helped Yeo Valley navigate the challenges of inflation. The most recent accounts for its main Yeo Valley Production business show a big jump in sales and healthy profits.

Last year, the West Country business snapped up Tideford Organics to strengthen its presence in the soup category, which it entered in 2022. This year it has returned to TV screens for the first time in 10 years, while launching kefir gut shots and Greek recipe snacking yoghurts.

13. Lactalis UK & Ireland

Turnover: £282.8m (+5.9%)
Operating profit: £1.3m
Year-end: 31 December 2023

The UK arm of the world’s largest dairy company is separate from the joint venture Lactalis Nestlé Chilled Dairy, which is a £137m business in its own right.

Lactalis UK & Ireland produces products ranging from Seriously Cheddar and Galloway and Orkney cheeses to global giants Président, Galbani and Leerdammer.

The past year has seen the business eliminate single-use plastics, while also launching Seriously Cheese Burgers and Extra Creamy Président Brie.

14. County Milk Products

Turnover: £243.6m (–23.9%)
Operating profit: £2.8m
Year-end: 31 December 2023

This Cheshire ingredients player supplies powders, yellow fats and liquid dairy products to food manufacturers, wholesalers and foodservice operators.

Its latest accounts show a drop in turnover due to two one-off exceptional items but a return to profit, helped by “significant performance improvements”. A key highlight for 2024 has been the commissioning and launch of a new powder blending facility – allowing it to make “any number of custom powder blends for both food and feed customers”.

15. Upfield Foods UK

Turnover: £242.6m (+6.4%)
Operating profit: £11.6m
Year-end: 31 December 2023

Flora owner Upfield was spun out of Unilever’s spreads business in 2018. It has since pivoted towards plant-based, pushing increasingly anti-dairy messaging in recent years, including an ad urging shoppers to ‘Skip the cow’.

The past few months have seen its flagship Flora brand move to capitalise on the growing posh butter trend through a smoked garlic variant.

The supplier it says the NPD “pushes the boundaries of what’s possible with plant-based innovation”.