First milk’s cheese packing facility at Maelor in Wales faces being shut down because the co-op has lost a major own-label Cheddar contract with Asda to Arla.
The dairy co-operative announced proposals to close the site today, saying it had become economically unviable to keep it operational. Own-label cheese for Asda – primarily English Cheddar in mild, medium and mature - accounts for 60% of the volumes packed at Maelor.
First Milk will continue to supply Cheddar to Asda until next April; it is proposing to close the site by the end of May 2014. A consultation with the 231 staff at the site – who are now facing potential redundancy – is due to kick off shortly.
Arla has picked up the Asda contract from First Milk. Arla did not comment immediately on its contract win, but a spokeswoman for Asda said: “Unfortunately, as part of a long-term strategic review, we have decided that from April 2014 we will be switching the supply of some of our cheese from First Milk to Arla. We appreciate how disappointing this news will be for them, but we want to reassure everyone that this decision was not taken lightly. While we have decided to make changes to our supply, we will continue to support the Welsh and Scottish dairy sectors, and there will be no impact to our regional products.”
Maelor is First Milk’s only cheese packing facility, and is also currently used to pack its Lake District Dairy Co Cheddar. A spokesman for First Milk said the co-op was in the process of exploring options of where to pack Lake District and other own-label Cheddar in the future, which could include partnerships at packing sites that currently operate under capacity.
First Milk added: “There is increasing demand for good quality British Cheddar, and we currently supply a number of customers with bulk cheese which is then packed at third-party facilities. In the event of the closure of Maelor, we have plans to extend these arrangements.
“We remain fully committed to producing high-quality British cheese from members’ milk as efficiently as possible, and providing our customers with a first class service. As a farmer-owned co-operative, the reason we’re here is to deliver sustainable returns to our members and this announcement today supports that objective.”
The prospect of closure marks a sharp reversal of fortune for the Maelor site, which last year was at the centre of ambitious expansion plans by First Milk. As The Grocer reported in February 2012, the co-op sought to expand the site in a £17m redevelopment project, and had already secured planning permission.
The spokesman said some money had been spent at Maelor in the meantime, but stressed this was only for normal maintenance and updating and did not amount to the £17m earmarked for redevelopment.
First Milk remains a major supplier of own-label cheese to Morrisons and The Co-operative Group. In recent times, it has increasingly focused its efforts on its Lake District brand, extending it into quark, milkshakes, regional cheese and – as of this week – RTD chilled coffee drinks.