Dairy Crest has confirmed that it is in negotiations with First Milk regarding "the possible sale of part of its retailer brand cheese operations". The discussions are "ongoing", said the company, and "there can be no certainty that this will result in a transaction".

Dairy Crest has been steadily winding down its commodity presence in favour of developing its brands while First Milk, like its fellow co-ops Milk Link and Dairy Farmers of Britain, has a strategy of increasing its processing activities.

Aside from its Scottish Island creameries and Westbury shareholding, First Milk's main processing involvement is via a shareholding in Robert Wiseman - a move that was widely acclaimed but which is not seen as being enough for many of its members and management team.

Industry speculation immediately assumed Dairy Crest was looking to sell all of its retail own brand and commodity creameries, including Aspatria, Haverfordwest and the packing plant at Maelor.

However, such a lock, stock and barrel sale is fraught with political difficulties. Aspatria has just signed an exclusive supply deal with Asda, and is effectively an Asda plant.

Dairy Crest has also invested time and effort into building up its relationships with its direct suppliers through Dairy Crest Direct, and will be reluctant to jeopardise that.

Such a move would also give Partners in Cheese - the Dutch group keen to build a new commodity cheese factory in Cumbria - a fillip. This proposed venture has so far failed to get off the ground partly because of Dairy Crest's commitment to Aspatria.

A sale would be viewed by many suppliers as a betrayal, so Haverfordwest is more likely to be on the cards in the first instance, where First Milk already has a 20% share with Dairy Crest.

Topics