ASDA drops price of milk, and increases amount paid to farmers

In recent weeks farming leaders have been calling on supermarkets to come clean and 'say what they pay' their farmers. The supermarket's latest move is designed to give both customers and farmers a better deal.

ASDA is also challenging other retailers to adopt the NFU's Vision for the Dairy Industry, which the supermarket has already signed up to, and is today launching its own Four Pint Pledge on behalf of dairy farmers (www.asdafourpintpledge.co.uk/).

The ASDA Four Pint Pledge:

• Supermarkets should set up dedicated supply arrangements such as those already in place at ASDA, Waitrose and M&S
• Supermarkets should publicly publish the price they pay their farmers
• Supermarkets should invest their own margin when lowering prices
• Supermarkets should adopt the NFU's Vision for the Dairy Industry.

The ASDA Farmer Partners already receive a 0.5p per litre premium for supplying ASDA, this will now double to 1ppl*. ASDA's farmers are also set to benefit from an increase in demand for their milk - the price drop, backed by a multi-million ad campaign, will encourage customers to buy millions more pints in the coming weeks.

The retailer is launching its first ever milk TV ad next week (16th March), highlighting that unlike other big supermarkets, ASDA can trace all of its milk back to its own farmers. It is also taking out national press ads in major newspapers tomorrow to promote its price drops and its Four Pint Pledge.

Chris Brown, agriculture strategy manager said: "By having a group of dedicated farmers who supply all our British milk, we're able to pay them more and still charge our customers less.

"We're open about the price we pay our farmers, while our competitors prefer to keep their prices under lock and key. We reckon our lower milk prices, together with the multi-million pound ad campaign we're launching, will dramatically increase the amount of milk we sell. And every extra pint we sell will directly benefit our farmers."

But while the price cut is good news for customers ASDA understands some dairy farmers will have concerns.

Chris added: "Most other retailers don't have dedicated supply arrangements and will find it hard to cut the price of milk without cutting the price they pay to their processors, and in turn farmers. That's why we're urging other retailers to adopt our four pint pledge.

"Any store which reduces the retail milk price without first meeting these challenges will have serious questions to answer from farming leaders. As our move shows, only a long-term win-win partnership with farmers can bring about a fairer distribution of costs in the milk supply chain."
Editors’ Notes:

*Excludes ASDA stores in Northern Ireland (ASDA has 288 food stores in Great Britain plus 13 in Northern Ireland).
ASDA sells approximately 450 million litres of fresh British milk each year.
ASDA has 550 dedicated dairy farmers - the ASDA Farmer Partners.
ASDA dairy farmers are currently paid 19.4p per litre (as of 9th March 06) for fresh milk.
ASDA Farmer Partners now receive 1p per litre more than other farmers within the Arla Foods Milk Partnership. This is significantly more than farmers receive from other major processors and co-ops who supply other supermarkets (www.mdcdatum.org.uk/milkprices/leaguetable.htm).
In the last year ASDA has paid each of its farmers the equivalent of a £3,900 bonus in addition to the Arla standard milk price.
For further info on the NFU's Vision for the dairy industry visit: www.nfuonline.com/x834.xml

Background to the ASDA Farmer Partners
In January 2004 all of ASDA's existing milk suppliers, Arla, Dairy Crest and Robert Wiseman, together with a number of interested dairy cooperatives, were asked to submit proposals to the supermarket based on three criteria: open relationships, dedicated/segregated processing, and identifiable farmers.

In May 2004 ASDA appointed Arla to become its sole supplier of fresh, liquid milk. As part of the new arrangement, all ASDA's raw milk in Great Britain is supplied by ASDA Farmer Partners, a dedicated group of c550 producers within Arla Foods Milk Partnership. Arla's milk pool is one of the largest in Britain with farmers stretching from the Southwest of England to the Northeast of Scotland.

Background to ASDA
ASDA can trace its own roots back to a group of Yorkshire farmers who formed Hindell's Dairies in the 1920s, processing and retailing milk and meat to a growing customer base. The company was extremely successful and continued to expand and diversify, acquiring more processing dairies, abattoirs, bakeries, shops, four managed farms and 22 rented farms. The company floated in 1949 as Associated Dairies and Farm Stores Ltd. Associated Dairies merged with Queen's Supermarkets to create ASDA Stores Ltd. in 1965.