Dairy cows

Tesco is launching a review of its much-lauded aligned pool of dairy farmers in light of recent changes to the milk market.

In a letter sent to its 650 farmer members last week, the retailer said it was launching a “comprehensive and thorough” review of the Tesco Sustainable Dairy Group (TSDG) to reflect the increasingly global nature of the dairy industry and key structural changes such as the abolition of European milk quotas at the start of April, industry consolidation, and the increased prevalence of farmer-owned co-operatives.

TSDG was set up in 2007 and supplies Tesco directly with own-label fresh and filtered milk products as well as Cheddar cheese.

It currently pays members a farmgate price of 30.93ppl for their milk – significantly higher than the market average of 24.06ppl [AHDB Dairy] – and offers a host of additional benefits including training, higher animal welfare standards, and information sharing on improving supply chain efficiencies.

In the letter, Tesco commercial director for fresh food and commodities Matt Simister said Tesco remained committed to retaining the TSDG and its independent price tracking model, and it would “continue to play an integral part of our dairy business in the future”.

However, “volatility has become a very real factor within the industry”, he added, with the review of the TSDG required to ensure it could adapt to industry changes and “make it sustainable for the future”.

A spokeswoman for Tesco added it was “proud of what we have achieved with our dairy farmers through the TSDG since its inception, including consistently paying one of the highest prices in the industry for our milk”. The review would be “collaborative”, she added.

Tesco refused to be drawn on whether the review may see a reduction in milk prices or member numbers for the TSDG. No timescale has been placed on the review.

The decision to initiate the review “will obviously cause worry and concern to those affected”, said the National Farmers Union’s dairy board chairman, Rob Harrison, but Tesco was being “open in its plans, and has committed to maintaining the independent cost tracker element”.

Harrison added: “It is vital that throughout this process Tesco works to further develop transparency, fairness and sustainability within the model.”

Harrison called on Tesco to expand its support to other dairy products in order to “confirm their commitment to the British dairy industry”, and advised “all TSDG members to be fully engaged in this review over the next few months to ensure their views are raised and heard”.