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Multiples look to Europe as free market raises prices.

THE historic scrapping of the 61-year-old Milk Marketing Board for England and Wales was greeted with a storm of protest from the multiples this week. On Tuesday they all put an average of 2p on a pint. As if that was not bad enough, the majors have also threatened to source cheaper dairy products abroad, which goes against their current policy and the Government's intention to reduce the 6 billion [pounds] trade gap.

"By buying better and selling more, the ASDA price of a four pint carton is 20% less than this time last year. In a single stroke the new milk marketing system will put prices back up by 10%," trading director Tony Campbell told The Grocer.

"Our customers buy 6.5 million pints of milk a week. This could cost them more than 6 million [pounds] a year on liquid product alone."

Andrew Dare, chief executive of Milk Marque, told The Grocer this week that it is unfair to blame the current round of retail rises on his new co-op's pricing policy. "Other costs are going up and they justify a rise, but don't use the raw material as an excuse," he said.

The average retail price of a pint in supermarkets will now be 28p, up by between 2p and 3p, despite the fact that the increase to dairy companies from the new co-op Milk Marque is only 0.5p a litre higher than the old MMB price. This translates into less than 0.3p a pint. Minister of Agriculture William Waldegrave told the first annual lunch of the newly christened Dairy Industry Federation this week that his department's estimates were not far removed from these lower figures. "But a long way from the 2p and 3p being bandied about in the media," he emphasised. "I can understand that those charged with lobbying Government should state their case in strong terms. An element of exaggeration is not unknown even among politicians! But the ending of the scheme means that Government is now stepping aside, leaving the industry to determine its own future."

Kwik Save marketing director Nick Goss said: "We are not about to implement any instant price changes and we are certainly not going to lead the market upwards, that is not the way we operate. Nevertheless, we will review the situation on a daily basis." A four-pint jug retails for 77p; At JS, ASDA and Tesco it is available for 89p.

While all multiples told The Grocer fresh milk will continue to be sourced in Britain, they all emphasised it may be necessary to look elsewhere for some dairy products.

It is known that several of the majors were "talking prices" with French suppliers at SIAL in Paris last week.

Tesco dairy trading director Sandra Turner said: "This is not a prospect we relish, but we have to be realistic about the difference in product prices that now exist between Britain and the continent."

ASDA told The Grocer on Wednesday it will look to Europe for such products as cheese, yogurt and UHT milk.

Campbell explained: "Suppliers from all over Europe have been beating a path to our door -- they can't believe their luck.

"In UHT we may have to source some 20 million litres from Europe. That's not good news for British suppliers," Campbell said.

Safeway told The Grocer it is "extremely worried" about the future of the trade. "With our commitment to the British Strathclyde Project, we are concerned the changes could jeopardise jobs and lead to more imports.

"We are particularly worried that UK cheese, butter and yogurt suppliers will be hardest hit. Although we will continue to buy British where it is commercially sensible, we fear that continental producers will become more competitive in some product areas."

JS told The Grocer that its butter and cheese prices will not go up this week, but in due course "they will reflect the higher cost of raw product".

Despite a 20% increase in wholesale prices to cheesemakers, Tesco will keep the price rises for British product down to about 5%. So a home produced Cheddar currently selling for 1.95 [pounds] will cost 10p lb more or 2.05. [pounds] lb.
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Title Annotation:multiples may source cheaper dairy products from overseas
Publication:Grocer
Date:Nov 5, 1994
Words:698
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