EXCLUSIVE
Ryan Crighton
Business Editor
SOARING butter prices and the decline of Scotland’s dairy industry are threatening the country’s national biscuit.
Shortbread manufacturers are being squeezed like never before by the rising cost their core ingredient, which can jump by up to £1,000 a tonne in a matter of months.
A Press and Journal investigation has found that since 2007, nearly 3,000 UK dairy farmers stopped milking, and over the same period, the price of butter nearly doubled from £1,750 a tonne to £3,000.
Demand from growing economies with western tastes has compounded the crisis further.
Last night, two of Scotland’s most famous shortbread firms said commodity prices were making life “difficult” – with one revealing that a spike in costs last year wiped nearly £300,000 off his profits.
Bill Dean, managing director of Dean’s of Huntly, said firms were “battening down the hatches” once more.
“I can remember not so long ago when the price was £1,600 a tonne – it’s now double that,” he said.
“The supply chain is smaller because more and more farmers have been squeezed out of dairy farming and into other sectors.
“That, combined with emerging markets developing a taste for western products, has created a perfect storm for butter prices – because demand is soaring.”
His 150 employees send 69 million biscuits around the world every year, but he said business was getting harder and harder.
He added: “We are currently doing out audit on last year’s accounts, and it has emerged that butter price rises wiped £295,000 off our profit.
“And we have no control over these massive fluctuations.
“If the prices are starting to rise again, then we better batten down the hatches.
“We have a fixed price on our butter until the end of the year, but when it comes to renewing that, it could well be £1,000 a tonne more expensive. And we use 400 tonnes a year.”
Aberlour-based Walkers, which now employs a record 1,600 people, first exported its shortbread to France in the 1970s.
It now sells its internationally-famous shortbread, oatcakes and other Scottish specialities all over the world and exported biscuits worth £50million in 2012.
Despite that success, joint managing director Jim Walker says they too are being squeezed.
“Butter prices are always a huge challenge,” he said.
“The price has been very volatile for six or seven years now, and the general trend has been in an upwards direction.
“But even seven years ago it was volatile – but when there were spikes in price then, it was usually followed by a correction. It would shoot up then come down.
“We use several thousand tonnes a year and the price has a huge impact on our business, more than any other commodity.
“There is rising demand for butter worldwide, and adverse events elsewhere in the world can also add to the price.
“Our margins have been squeezed for two years now and when the price rises above £3,000 a tonne, it becomes very difficult.”