Arla has been dumped as a fresh milk supplier by Iceland and will be replaced by Medina Dairy from 1 April.
The deal is understood to represent about 30 million litres a year, and adds to volumes already secured by Medina in 2016 to supply Iceland in South Wales and South West England.
Medina and Müller are now the retailer’s primary own-label milk suppliers in Great Britain, with Dale Farm supplying stores in Northern Ireland, a spokesman for Iceland confirmed. Arla declined to comment.
Industry sources have claimed Medina secured the supply deal by offering a lower farmgate price than Arla. Protest group Farmers for Action was due to meet the retailer this week, it is understood.
However, Iceland insisted Medina’s farmgate price was “based on a basket comparison that includes prices paid by Arla and Müller”.
The Iceland deal marks the latest effort by Medina to establish itself among the big supermarkets after it secured a toll-processing deal with Müller in October 2015. It follows a contract win to supply milk to some Sainsbury’s stores last May.
The toll-processing arrangement was a key Competition & Markets Authority condition when Müller acquired the Dairy Crest milk business. It requires Müller to supply and process up to 100 million litres of milk a year for Medina at its Severnside dairy.
“Medina is delighted to have been awarded an additional contract to supply Iceland,” said a spokesman for the processor. “This builds upon our existing contract to supply Iceland and reflects our commitment to building long-term relationships based on delivering consistently high product quality and customer service levels.”
News of the Medina contract win was first reported in analyst Ian Potter’s newsletter.
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