Sainsbury has cut Arla out of its own-label liquid milk supply chain and divided its business between Robert Wiseman Dairies and Dairy Crest.
Wiseman, which lost an estimated £70m of business when Asda selected Arla as its sole fresh milk supplier, will pick up an estimated £45m of new business with Sainsbury, which is worth about £70m at retail level.
Dairy Crest will pick up £8m at retail level.
Under the deal, which takes effect early next year, Wiseman will increase its share of Sainsbury’s fresh milk business from 20% to 50%. However, Arla
will continue to supply Sainsbury with Cravendale milk, butter, cream and cheese.
Sainsbury declined to comment, but industry sources said there had been concern over Arla’s ability to support other accounts following its commitment to Asda.
The move was welcomed by farmers’ co-operative First Milk, which supplies Dairy Crest and Wiseman. Chief executive John Duncan commented: “To receive clarity on volumes for a longer period of time from Sainsbury is great news.”
Separately, Sainsbury said it would roll out milk from cows fed on non-GM diets to a further 85 stores by Christmas, well ahead of schedule.
The milk, which is now available in 105 stores, has been performing well, according to head of dairy, Jon Arnold.
“Sales of this specialist milk have given us the confidence to extend distribution earlier than planned,” he said.
Elaine Watson