Organic deals with Tesco and Rachel's give Wiseman cream of milk market

Published on Sunday 12 November 2006 01:05

ROBERT Wiseman Dairies will tomorrow unveil two transformational organic milk deals that will position it as one of the UK's leading players in the sector.

The East Kilbride firm is expected to confirm that it has secured 60% of Tesco's organic milk requirement and signed a deal to process and pack the Rachel's brand of organic milk on behalf of Horizon Organic Dairy.

Demand for organic foods has risen sharply over the past 18 months as consumers have become more health-conscious and more interested in the origin of their food.

According to market research group Datamonitor the UK market for organic food was worth 1.6bn in 2005, double its value in 2000. Within this sector organic milk is growing at up to 60% per annum.

The growth has been driven in part by the big supermarket chains, which sell organic produce under their own labels.

Wiseman's positioning within the organic market is being underpinned by a 46m dairy under construction in Bridgwater, Somerset.

This will add to a comprehensive UK network of dairies and distribution depots, leading to reductions in food miles.

The Organic Milk Suppliers Cooperative has said that the huge consumer demand for organic milk means supply will remain tight in the short term.

The organisation's national market predictions show an additional 60 million litres of milk are required in 2008/9 to satisfy increased demand.

Shares rose more than 2% on Friday, closing at 449.25p, ahead of the half-year figures, suggesting that results will come in ahead of expectations. In May, Wiseman posted a 6% rise in profits to 26.7m on a turnover of 568.6m.

Chief executive Robert Wiseman is expected to say that the group - which has operations in East Kilbride, Aberdeen, Glasgow, Manchester and Droitwich Spa - is investigating the installation of a Biomass plant to produce steam, as well as other projects to maximise energy efficiency and minimise emissions to the environment.

The firm is currently locked in a court action with its Leeds-based rival, Arla Foods, the former Express Dairies milk group, after the Office of Fair Trading provisionally concluded that Wiseman fixed prices in an alleged cartel with five other dairies between 2000 and 2003.

The allegations relate to Scotland's 140m-a-year "middle ground" market sector, which provides milk to retailers other than major supermarket chains, including corner shops, schools, cafs, nursing homes and hotels.

Arla is seeking 15m in damages, but Wiseman disputes the OFT's initial judgment and will defend a claim that it calls frivolous.