Dedicated milk supply pools established by the retailers are proving a great success, according to Waitrose.

The chain established its own supply pool in 2000 as a way of improving sustainability of milk and guaranteeing supplies, with Tesco and Sainsbury's following suit last year.

Waitrose's dedicated supply base of farmers has been relatively stable in the past seven years, it said, with overall milk output rising 2.5%. This was despite farmer retirements.

Dairy farmers in the pool have been able to invest significantly more in their businesses than those that are not, said Waitrose. It cited its own data that showed Waitrose suppliers invested 2.4ppl in 2006 and 3.3ppl in 2007, roughly double the industry average.

Waitrose pointed out that it now regularly monitors suppliers' expenditure as part of its benchmarking process in order to establish how efficiently the pool is working and ensure it continues to be effective in future.

Other retailers are also believed to be considering setting up similar dedicated pools.