The moves last week by Sainsbury and Tesco to change their milk supply arrangements from three to two main suppliers begs the question of whether there will be a change by Morrisons.
Last week Sainsbury dropped Arla as a supplier in favour of Wiseman with Dairy Crest volumes broadly unchanged. Then Tesco switched business from Dairy Crest to Wiseman as well as maintaining its volumes from Arla. In May, Asda switched to Arla alone.
The effect of the changes to date is that Arla, by early 2005, will be reducing its volumes to supermarkets 12%, Wiseman will grow volume 50% and Dairy Crest will be net loser by 30%.
But that may not be the end of the story if Morrisons reacts. It is estimated Morrisons’ milk volumes are currently sourced almost equally among the three main suppliers and a decision to
reduce to two or even one supplier would clearly affect one or two of the main dairy groups severely. But it might be premature for Morrisons to make changes while it is digesting Safeway.