Dairy Crest targets baby milk move

Dairy CrestCathedral City and Clover maker Dairy Crest is eyeing a move into the "rapidly growing" baby formula milk market under plans to start selling specially prepared whey from its Davidstow creamery in Cornwall.

The group is in talks with potential partners and is finalising details of the investment needed to make so-called demineralised whey powder - a base ingredient in baby formula.

Dairy Crest was considering using whey produced at the cheddar creamery for sports nutrition drinks, but said the burgeoning baby formula market had "significant potential".

It is looking to invest up to £40 million in a whey production facility at the Davidstow site, but will give more details in September.

The announcement came as a trading update revealed a 4% year-on-year slide in sales of its four key brands - Cathedral City, Clover, Country Life and Frijj - in the quarter to June 30.

While sales of Cathedral City cheddar and Clover rose, higher cream prices led to "significantly lower" sales of its Country Life block butter as Dairy Crest reined in promotions and sales of Country Life spreadable remained flat.

It added that trading was also impacted as it scaled back promotions of its Frijj milkshake brand while it upgraded bottling and production facilities as part of plans to add different formats, including smaller sized bottles.

But the recent increases in cream prices has been helping its dairies business, which has also seen the group hike the price it pays its farmers to 31p a litre for both its standard liquid milk contract and milk for cheese, up from 27p a litre for liquid milk and 29p a litre for milk for cheese a year earlier.

Dairy Crest, which is served by 1,300 dairy farmers, also said it recently renewed its milk contract with Lidl, having extended its contract with supermarket giant Sainsbury's in February for another three years.

It added cost cutting was also helping keep the dairies arm on track to meet its medium-term target of a 3% return on sales. Dairy Crest is slashing costs by £20 million a year as it consolidates the business into a single structure, with an integrated supply chain.

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