14 | The Grocer | 13 January 2018 Get the full story at thegrocer.co.uk
analysis milk
WHO SUPPLIES MILK TO THE MULTS? (%)
Key: (^) ◻Arla (^) ◻Müller (^) ◻Others
TESCO SAINSBURY’S ASDA MORRISONS ALDI
Total litreage (m litres)
1,10 0 550 500 350 300
33.3 20 100 100 70
66.6 50 0 0 15
0 30 0 0 15
WAITROSE LIDL CO-OP ICELAND M&S
Total litreage (m litres)
100 320 370 165 100
0 10 0 0 0
100 60 100 75 100
0 30 0 25 0
Sources: Ian Potter Associates, The Grocer research
Notes: graphic shows estimated % share of volume; Aldi: (from Oct 18); Sainsbury’s
other suppliers: Medina & Tomlinsons; Aldi’s other suppliers: Graham's & Trewithen;
Lidl's other suppliers: various; Iceland's other suppliers: Medina and Dale Farm
Who now holds the balance of power in the liquid milk market?
L
iquid milk is a highly
competitive busi-
ness, so when retailers
change suppliers the entire sec-
tor sits up and takes notice.
Last week’s news that Aldi
has moved the bulk of its own-
label milk contract from Müller
to Arla was no exception.
The new contract – effective
from October – will see Arla
supply three-quarters of Aldi’s
own-label milk.
It comes on the back of Arla
winning several other major
contracts over the past two
years, including a new three-
year deal to supply Asda. Over
that same period, Müller has
lost an estimated net 300 mil-
lion litres from the likes of
Morrisons and Sainsbury’s.
So does Aldi’s decision to
make Arla its main supplier
mean the dairy co-operative
now has the upper hand over its
German-owned rival?
Not so fast. While Arla has
picked up momentum in recent
months, Müller continues to
hold the hugely valuable Tesco
contract, which it picked up
as part of a “game changing”
strategic partnership with the
retailer back in 2016. That alone
is worth an estimated 730 mil-
lion litres.
Working out how liquid milk
volumes are split between
Müller and Arla across the other
UK retailers is tricky, given such
figures are jealously guarded for
commercial reasons.
However, estimates by ana-
lyst Ian Potter and research by
The Grocer (see graphic) sug-
gest Müller continues to have
the upper hand in volume
terms. It supplies an estimated
1.8 billion litres to the 10 largest
Does the Arla-Aldi deal put
Müller on back foot in milk?
supermarkets compared with
1.5 billion litres for Arla.
Having said that, there’s no
denying Arla has made signifi-
cant gains since February 2016
on the back of an aggressive
campaign to fill capacity at its
huge Aylesbury dairy and find
a new home for the 200 mil-
lion litres it lost when Tesco andKevin White
Müller went into partnership.
It sealed a new three-year
deal to supply Asda in February
2016, followed by a major sup-
ply deal with Morrisons, which
comes into force in March.
Smaller dairy suppliers
have also recently managed
to pick up volume with the
mults, as Müller was requiredto effectively sub-let some 100
million litres of capacity at its
Severnside dairy to other pro-
cessors as a condition for its
acquisition of Dairy Crest’s milk
business in December 2015.
It’s all part of a major “rebal-
ancing” of what has become a
consolidated milk market, says
one senior industry source.
Müller’s share of supermarket
milk business was bound to
dwindle. “With Dairy Crest out
of the picture in liquid milk, the
likes of Sainsbury’s have looked
to diversify supply to include
more of a mix,” suggests the
source.
But the changes we’ve seen
in the past two years aren’t
purely down to rebalancing
and attempts to ensure Müller
doesn’t become too dominant.
Arla has been pushing its
farmer-owned credentials hard,
a move that has resonated well
with several retailers. It’s also
been working on delivering
more “tailored solutions” to its
retail customers, says senior VP
for sales Ash Amirahmadi.
Just as importantly, Arla has
looked to leverage the success
of its branded portfolio to ena-
ble it to compete on price in own
label, suggests John Allen of
Kite Consulting.
At the same time, Müller’s
profile has suffered since the
departure of high-profile boss
Ronald Kers last May – Kers’
successor, Uwe Sommer, lasted
just three months, and the dairy
company has been without a
group CEO since.
However, with the Dairy Crest
integration now completed,
the tide could be starting to
turn in Müller’s favour again.
Expect more jockeying between
milk’s two biggest players in the
months ahead.