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Wiseman, Arla show UK dairy recovery

By Chris Mercer , 31-Mar-2006

Early signs suggest a recovery on Britain's dairy market as both Arla Foods UK and Robert Wiseman halt the margin rot with brand development and price rises.

The two dairy processors both managed to offset "exceptional increases" in packaging and energy costs by raising prices across the dairy sector this January, they have announced in respective trading statements.

Wiseman's share price rallied from 297p Wednesday to 311p Friday after it predicted full year results for 2005 would beat market predictions.

 

The news indicates more stability on Britain's dairy market after a spate of profit warnings last autumn, though commodity prices remain unstable.

 

Arla and Wiseman said brand and added value growth had led their performances in 2005, echoing a similar statement from rival Dairy Crest on Wednesday.

 

Arla said sales of Lurpak and Anchor spreads rose six per cent. Newly launched Lurpak Spreadable Unsalted also successfully tapped the growing market for light spreads in Britain, without cannibalising other Lurpak products, the firm said.

 

Wiseman has focused on combining brand growth with adding value to its private label portfolio.

 

The group said it would spend £2m to advertise its "The One" milk brand this summer and has recently launched a Disney branded milk aimed at children. Alongside this, Wiseman has also begun supplying Tesco with a cholesterol lowering milk drink called Reducol.

 

Branding and added value products will increase their importance in the Europe's dairy industry up to 2012 as commodity products lose their profitability, according to a recent European Commission report.

 

The European Union's Common Agricultural Policy reform has already begun cutting prices across the bloc for butter and skimmed milk powder.

 

Commodity price cuts and instability, particularly in butterfat, still threaten to disrupt the UK dairy market, despite a recent recovery from processors, said an analyst at Britain's Milk Development Council (MDC) to DairyReporter.com

 

Cream prices have also caused problems. Wiseman said falling bulk cream prices had put pressure on its margins over the last year.

 

Wholesale cream prices have slumped continuously from £1,030 per tonne in October 2003 to £770 per tonne this month, according to newly released figures from the MDC.

 

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