Müller has taken over the processing of Sainsbury’s milk by Tomlinsons Dairies farmers, following the collapse of the processor earlier this week.
The Grocer understands Müller started collecting milk from about 40 Tomlinsons farms destined for the Sainsbury’s Dairy Development Group last weekend, as the processor prepared to appoint administrators.
Tomlinsons, which processed between 15% to 20% of Sainsbury’s entire own label milk supply, collapsed on Monday afternoon after experiencing “significant cashflow pressures”. It employed 331 staff and also supplied milk to M&S and independent retailers across North Wales and the north west of England.
Administrators PwC said the Wrexham-based processor had posted operating losses of about £5m in the year to March 2018, with a further £2m loss for the 12 months to March 2019.
Sainsbury’s declined to comment on the demise of the supplier, after stating it did not discuss individual supplier relationships. However, it is understood the decision for Müller to process milk from Tomlinsons farmers helped ensure it retained enough supply to avoid milk shortages on shelf. The processing arrangement is expected to continue for the forseeable future.
Tomlinsons won a contract to supply Sainsbury’s in 2016 alongside fellow challenger Medina Dairy and market leaders Arla and Müller, as parts of efforts by the retailer to diversify its milk supply base.
A number of industry sources have suggested a new supply contract, which would have seen Sainsbury’s retain Tomlinsons but drop Medina, had been agreed during the summer, and would come into force in October 2020.
As part of the new contract, a number of farmers would have seen their milk moved from Müller to Tomlinsons and vice versa, dependent on their geographical proximity to the two processors. However, the contract offer was understood to have been withdrawn at the end of last week.
Questions now needed to be answered by Sainsbury’s over its tendering process, said industry analyst Ian Potter. He added many farmers had expressed concerns over the long-term future of Tomlinsons in recent meetings with Sainsbury’s.
Those supplying the collapsed processor were also owed up to six weeks’ worth of payments, which could “push some over the edge”, he said.
“Those farmers trusted Sainsbury’s and believed the retailer had carried out due diligence on the Tomlinsons business,” Potter said. “It’s now time for Sainsbury’s to step forward, accept responsibility and comment on what’s next, in particular their position on the money its SDDG farmers are due on milk supplied from 1 September to 12 October.”
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