The chief of Scotland’s largest independent dairy company says more work must be done to encourage shoppers to ditch foreign products and buy local instead.
Speaking at the annual meeting of the Scottish Agricultural Arbiters and Valuers Association (SAAVA), Graham’s The Family Dairy managing director Robert Graham said the UK was currently the second largest net importer of dairy products in the world after China.
He said displacing these imported dairy products was a key focus for his company, which is based at Bridge of Allan but also has milk processing sites in Nairn and Fife.
Liquid milk sales represented 66% of company turnover, which stood at £83.6million for the year ended March 2016, with other products such as ice cream, cheese, yoghurt and cottage cheese making up the remainder.
The business has a mixed customer base with a third of all milk processed into supermarket own-brand products, and the remainder sold via other outlets and as products with the company’s own brand.
Mr Graham said the company’s branded products were now present in 54% of Scottish households – this compares to 47% brand penetration for Irn Bru.
“We have what we believe to be the highest level of penetration of any Scottish food and drink product,” added Mr Graham.
He said he had been left “feeling sore” after the company received criticism last year from some producers over its pricing.
For a period of time an AB pricing mechanism was introduced to deter farmers from producing more milk than the market needed.
The mechanism paid farmers two prices – an A price for 80% of the milk volume they produced the year before and a B price for anything on top of this.
“Commodity prices were falling at a time when volumes coming off farms were very strong. We had far higher balancing costs,” said Mr Graham.
“We have done a lot to protect our producers from world markets. When markets improve our industry is generally slower in being able to recover pricing from customers, but we have done a lot in terms of protecting farmer pricing.”
He said maintaining a close relationship with the company’s 108 farmer suppliers, which includes a small group in the north and north-east, was extremely important.
“Our farmers have been better off than had they been with Arla, Muller or First Milk,” said Mr Graham.
The company focus in the year ahead would be improving margins and achieving greater stability, added Mr Graham.
On pricing, he said: “We were bearish coming into this year but we are currently less bearish. I think it’s [price] going to be pretty flat.”
