The supermarket, which sources all of its milk from Arla, currently has about 500 dedicated farmers supplying it. That number will shortly be reduced to 400, with those farmers continuing to receive a 1ppl premium on their milk price.
Over the past five years farmers had been moved in and out of its central supply pool depending on seasonal milk requirements, explained Chris Brown, Asda's head of ethical and sustainable sourcing, and it regularly reviewed which farmers supplied it. "We made the move after feedback from farmers that we needed to have an aligned group," he said. "We didn't always have the same farmers in the group and we wanted to make it consistent."
Brown also claimed the retailer had become frustrated by some farmers failing to attend meetings. "Some farmers have not turned up to a single Asda meeting in five years. We've paid for international experts to improve their herds. We needed a cost-effective group that are committed to us and us to them."
As Asda sources an estimated one million litres of milk a year, not paying the 1ppl premium to 100 farmers will save the supermarket £1m annually. However Brown rejected the suggestion that the move was a ploy to save money or give it a percentage of cheaper milk to promote with. "This is an evolution, and it's been driven by farmers' feedback," he insisted.
A DairyCo report earlier this month indicated that joining aligned retailer supply pools offered farmers a good way of growing their businesses.
Arla farmers aligned to Asda receive 24.56ppl, according to DairyCo, while Arla farmers aligned to Tesco receive 26.43ppl.
Asda's move comes as Arla UK announced an increase in turnover from £1.4bn in 2008 to £1.5bn in 2009, with strong growth in key brands Lurpak, Anchor, Cravendale and Lactofree.