ROBERT Wiseman Dairies yesterday signalled it could soon be forced to cut the price it pays farmers in response to fierce competitive pressures in the supermarket sector.
Updating investors ahead of the company's half-year-end, finance director Billy Keane confirmed Wiseman had reduced the suppliers' price for raw milk from July 1 to bring its position closer to competitors and to take account of lower returns from bulk cream sales.
Wiseman, which will supply 1.3 billion litres of milk in its full financial year, has guar-anteed the new price until November but remains concerned about its competitive position following the decision of Arla, the UK's biggest dairy group, to cut its prices by 0.4p a litre at the farmers' gate.
However, Wiseman remains at the top of the league table as the highest payer for raw milk, spending 0.6p per litre more than Arla.
East Kilbride-based Wiseman has been battling with Arla and Dairy Crest to win contracts from the major supermarkets. The company now has a market share of 22.8%, leap-frogging Dairy Crest to stand as number two to Arla, which holds a 34% share.
Wiseman was rocked in May when Asda, owned by US retail giant Wal-Mart, axed its deal but in August the group won new contracts with Tesco and Sainsbury to increase the volume of milk it supplies, more than offsetting the Asda loss.
Under the new deal, Wiseman will supply 60% of Tesco's milk once the contract begins next year. It is responsible for 50% of Sainsbury's business with the revised deal set to start in January. The net result of these changes has been that Wiseman's overall volumes will increase by 100 million litres a year.
Wiseman will stop supplying Asda stores in England in November with deliveries to Scottish shops to cease in January. The company will retain its relationship by supplying semi-skimmed product Fresh'n'
Low, The One 1% fat milk and cream to Asda.
City analysts are now looking for signs of contract renegotiations with Morrison/Safeway. The newly-merged supermarket is supplied by all three major dairies but may choose to switch to fewer suppliers.
However, Keane said he was ''confident'' of holding the deal with Morrison until the company decides to conduct a formal review of its milk suppliers.
Wiseman is also pumping a (pounds) 7m investment into its dairy at Droitwich Spa in England to produce an extended shelf-life milk in June 2005. It is also spending (pounds) 7.5m on a new depot in Northampton to service south-east England.
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