Wiseman hit by loss of £40m deal

Published on Thursday 5 May 2005 11:56

SHARES in Robert Wiseman, the Scottish dairy group, had plunged 11 per cent by midday after the firm announced it had lost a contract worth about £40 million a year going forward to rival Dairy Crest.

The move comes as supermarket giant William Morrison cuts back on the number of milk suppliers it uses.

East Kilbride-based Wiseman will continue to supply Morrisons until October. However, that was not enough to save share slipping 30p to 240p.

For Dairy Crest, Britain’s biggest dairy supply group, the deal means providing a bigger share of Morrisons’ milk demands. Surrey-based Dairy Crest currently supplies the chain - which recently bought Safeway - with 30 per cent of its milk needs. But that will rise to 50 per cent under the shake-up.

In a statement, Wiseman said: "Following a decision to rationalise its number of milk suppliers, Wiseman is being given notice that its supply contract with Morrisons is not to be renewed."

Last May, Wiseman was dumped by Asda when it decided to switch to a single milk supplier in the shape of Arla, costing the firm a contract worth 70m a year.

But in August, Wiseman clawed back the lost business when it won a 70m deal to increase supplies to Sainsbury. It then went on to win business away from Dairy Crest when Tesco asked it to increase supplies as well.

However, the shake-up in the supply chain led to the firm supplying fewer Scottish stores and Wiseman announced that it was closing its Loanhead depot with the loss of about 96 jobs and the relocation of the operation to West Lothian.

Today, managing director Robert Wiseman said that the company was not really in a worse position in the short-term, despite the impending loss of the Morrisons contract.

"As a result of changes in milk supply announced by multiple retailers in the last 12 months, the net position in terms of volumes sold by Wiseman is expected to be broadly neutral," he said.

"We are disappointed with the loss of this customer, which accounts for around nine per cent of our current volumes."

But he also cautioned: "This loss is expected to affect the business from October and we will take mitigating actions to minimise the impact.

"We remain focused on long term, profitable growth."

Drummond Hall, chief executive at Dairy Crest today hailed the deal with Morrsions.

He said: "We are delighted to have been awarded increased volume by Morrisons.

"This is not only good news for Dairy Crest, but also good news for our farmer suppliers."

And he added: "We look forward to developing our relationship further with Morrisons in the future."

Separately, Dairy Crest said it was buying Derbyshire-based dairy firm Starcross Foods for 16.9m, including around 9.1m of debt. Starcross currently processes about 100 million litres of milk a year.

Mr Hall said the acquisition "better aligns our business to Morrisons and our other customers’ requirements and will strengthen Dairy Crest’s competitive position".