Arla has taken full ownership of a milk powder and butter joint venture with First Milk at the Westbury Dairies site in Wiltshire.
The Lurpak and Cravendale owner has been a partner in the Westbury business since September 2010, and purchased the freehold for the site – where it produces Anchor butter – in December 2013.
Taking full ownership of Westbury was a key strategic move, Arla said. “The Westbury site is now an integral part of that global network of Arla production sites and will benefit from being so, further helping the UK to play an even more significant role in our global strategy,” added Peter Giørtz-Carlsen, executive vice president for Arla Foods UK.
First Milk said it had decided to sell its stake – for an undisclosed amount – to focus on its turnaround strategy for its business. It comes after the dairy co-op sold its Glenfield Dairy business in Scotland in December.
Exiting Westbury represented the “single biggest step” in First Milk’s turnaround plans, said a spokesman. The deal would lessen the financial burden on First Milk and would bring with it a “major unlocking of milk prices moves” over the coming months, he added.
First Milk has had shared access of the Westbury site, which produces skimmed milk powder and bulk butter, through various joint ventures since 2003. First Milk will continue to have access to the powder drying capacity at Westbury during peak milk production and at other pre-defined times of the year, the co-op said, while at the same time reducing its exposure to swings in global dairy commodity prices.
Some of the milk sent by First Milk for processing into powder would now be sold into its brokerage contracts and into cheese production, which would deliver better returns, it added.
“While the dairy industry remains exceptionally tough, the progress we have made over the past nine months gives us the platform to focus this year on improving the relative returns to our members,” said First Milk CEO Mike Gallacher.
The agreement follows the appointment by First Milk of FMCG veteran Clive Sharpe as chairman earlier this week as part of a move to bolster the governance of the business which has also seen it hire Kenny Bain as group operations director, Brian Mackie as chief operating officer, and former MD of Müller UK Carl Ravenhall as a non-executive director.
The dairy co-op announced further cuts to its farmgate price at the end of December, with some farmers now being paid less than 18 pence per litre.