Tesco liquid milk contract split three ways

As exclusively reported two weeks ago by the Irish Farmers Journal, Glanbia recently lost a proportion of its liquid milk contract for Tesco own label milk to Arrabawn and Aurivo.

It is now understood that in fact up to 80% of that contract was lost to both suppliers. When contacted, none of the three processors was willing to comment on the Tesco contract.

The annual tendering process for this contract is fiercely competitive as it represents 50% of all milk supplied to Tesco. Glanbia had won the contract in the past number of years.

The contract is said to be worth in the region of €45m in total and approximately 40m litres in total, representing 8% of all liquid milk sold in the country.

It is now estimated that Glanbia holds approximatly 20% to 25% of this particular contract, with Aurivo holding 40% to 45% and Arrabawn having about 33%. Glanbia is still continuing to supply the Avonmore brand to Tesco under a different contract.

Last year, Irish dairy farmers supplied 508m litres of liquid milk to a market, based on retail prices, valued at more than €500m.

According to Tesco, it purchases up to 70m litres of Irish milk every year, which is made up of branded and own label milk.

But unlike the other supermarkets, Tesco up to now had only one supplier of own label liquid milk. Meanwhile, Musgraves (Supervalu and Centra) sources its liquid milk from five separate suppliers, while the German discounters Aldi and Lidl also have a number of suppliers.

Aldi sources its milk from three separate processors – LacPatrick Co-op, Strathroy and Arrabawn. Lidl is supplied by Strathroy for liquid milk in its Northern Ireland stores and both Aurivo and Strathroy for its outlets in the south.