Part one of your problem in
pursuing a fair milk price is illustrated on the soft drink shelves at your
nearest supermarket. At mine, you can get two litres of Co-op rola-cola for
29p…or 1.5 litres Coca-Cola for £1.71. That’s a 7.86-fold (i.e. 786%)
difference in the price per litre. In the same store for four pints of milk, the
price of Cravendale at £1.99 is 45% higher than Co-op own brand’s £1.37. Clearly,
this suggests a relationship between brand and pricing, and brings economics
into play, particularly the law of supply and demand.
When the Co-op wants rola-cola, it has several or perhaps
many potential suppliers, all of whom are more or less equally capable of
assembling “carbonated water, malted barley extract, natural flavouring, phosphoric
acid, sweeteners (Acesulfame K, sucralose), preservative (potassium sorbate)”
and decanting it into plain, generic plastic receptacles. So plentiful supplies
from an ample choice of manufacturers who can be played off against each other
offers the buyer their dream dog-eat-dog scenario…which means they can sell two
litres of rola-cola for 29p and still make a profit.
In contrast, there is only one supplier in the
world who can combine “carbonated water, sugar, colour (caramel E150d), phosphoric
acid, natural flavourings including caffeine”, then place it in an iconic
bottle (albeit plastic but still a gorgeous piece of design) with distinctive
red and white labelling, and stronger emotional bonds with consumers than
between many courting couples. So chances are this manufacturer is making a
rather bigger margin than the poor retailer from the £1.71 for 1.5 litres
selling price.
Obviously, this situation has not arisen by chance.
It comes about as a result of a multi-million pound/dollar, multi-national and
multi-decade investment in the Coca-Cola brand. On a smaller but still
significant scale, the Cravendale owner’s investment in that brand is what
earns them the 45% higher selling price currently evident at my local Co-op.
Part two is human nature, in particular the innate
drive to exploit power to one’s own advantage. To drive down feeds costs, some
farmers join buying groups. In the auction ring, how many farmers give away how
keen they are by bidding enthusiastically? When buying fertiliser, are you
happy to pay more than the going rate to ease a merchant’s difficulties with
narrow margins?
All today’s large farm businesses were once small
ones. Along the way, the strong used their power to exploit opportunities and
expand. The same goes for shops. Right now, the biggest shops clearly have
rather more power than even the very biggest farms.
Part three is a curious business anomaly. A mixed
farm producing cereals as well as milk will enter into grain sale contracts for
a defined tonnage, specification and price. Yet the same farm agrees to sell
milk under a contract that specifies neither volume nor price, and with a long
notice period.
Clearly, finding a solution is a huge challenge for
the farming industry. In addition to milk, this scenario also applies in eggs,
pig meat, vegetables and salads. When imported products are readily available,
things get even more difficult because supermarkets as just as likely to buy
competitively priced imports as we all are individually with cars or tractors,
clothes or shoes. So it can be argued that the liquid milk sector at least has
the advantage of being ring-fenced to the UK.
For supermarkets, the need for customers to buy
fresh milk every few days is a powerful vector in persuading shoppers to return
more frequently that they otherwise would. That's why milk is discounted, not
because supermarkets don't value it. On the contrary, their need for fresh milk
is fundamental to their business model, and if it's unbranded or their own
brand so much the better because that allows them to play one eager (i.e.
desperate) supplier off against another. But if the availability of unbranded
milk was restricted, or ideally eliminated, they'd have no choice but stock
branded milks, among which the strong brands (like Cravendale milk and Muller
yogurts already, for example) would earn the best prices for their suppliers.
Otherwise, most liquid milk, with the notable and
minority exceptions of innovative farmers' brands like Acorn, Bowland Fresh and
Jess's (see back copies of Farmers Guardian
for reports on all three), continues to be anonymous generic white stuff in
plastic cartons, sold at give-away prices by retailers as an important part, to
them, of their customer retention strategies.
Farmers wanting to be play-makers not pawns have to
act accordingly and not leave action to others. For example, those yet to join
Farmers For Action, already better off as a result of FFA’s activism getting
the August price cuts cancelled, could start by signing up. Every dairy farmer
without exception should contact their farming union and find out what help they’re
offering in getting more balanced supply contracts in place between producers
and processors.
Then to support the SOS DAIRY campaign's
phase two, what if all dairy farmers were to de-tune cow diets so that yields
fell by two to three litres per cow per day? With feed prices where they are,
immediate cost savings could go some way towards cancelling out foregone milk
income. As long as de-tuning is done advisedly, with forage making up any
potential feed intake shortfall, it could be done without detriment to cow
health or fertility.
Empty shelves where milk should be is a spectre
that should worry even the most hard-nosed milk buyer and their retailer
customers. Three litres a day less milk from a million cows would be noticed
very quickly in the supply chain. Together with the ongoing publicity being
created by the industry, supply chain jitters could help strengthen
the dairy farming coalition's negotiating position in seeking fairer
contract terms and pricing mechanisms, and lasting stability for the long term.
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