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Milk may as well have been ruled by the tides this past year. For lockdown saw a truly tidal shift in the channel mix. As demand from foodservice ebbed, there was a storm surge in grocery.
That behaviour hasn’t disappeared with the easing of restrictions, either. Coffee shop suppliers say demand is still around 40% down on what it was pre-pandemic, while those that supply schools are still smarting from the six-month closure from March to September. The drying-up of demand in these sectors led to heart-breaking scenes of waves of fresh milk washing down the drain because processors couldn’t find alternative outlets.
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However, the latest statement is the first time the two processors have both confirmed their intention is to combine. If negotiations were successful, the parties would expect to notify any merger to the CMA, they added.
A merged Medina and Freshways would create a supplier with a combined turnover of almost £380m, according to the pair’s most recent accounts on Companies House, with Freshways parent Nijjar Dairies posting sales of £213.6m in the year to 28 December 2019.
Medina Dairy posted sales of £244.3m for the 78 weeks to 27 October 2018, which when annualised stood at £162.9m. However, it made a pre-tax loss of £1.4m over the accounting period (annualised to £934,000). Nijjar Dairies, meanwhile, made a pre-tax profit of £434,000 in 2019.
The shutdown of coffee shops hasn’t been a bad thing for flavoured milk
The milk market is being shaken up. In the past year, sales have surged by £113.3m on volumes up 1.6%. But own label, which accounts for nearly two thirds of market value, hasn’t cashed in at all. Sales have slipped 0.6% in value and 0.3% in volume. Brands, meanwhile, have passed the £1bn mark for the first time, with growth of £123.7m.
There are a number of factors at play here. These numbers do not include Aldi and Lidl, which rely far more heavily on own label. Even so, this does not explain supermarket own label’s three-point decline in market value share to 64.3% in a year. So what is going on?