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Supply uncertainty drives ingredient firm expansion

By Neil Merrett , 11-Jun-2008

Dairy ingredients group Meadow Foods says it is aiming for further expansion within its operations as part of moves to offset spiralling energy and distribution costs.

The UK-based company said that it was looking to capitalise on ongoing consolidation within the ingredients market through continued acquisitions in the sector and an increased milk supply.

 

 

 

Group managing director Paul Deakin said overall volatility in the dairy market, particularly for milk and other material costs, has ensured that manufacturers are increasingly keen to secure year round ingredient supplies.

 

 

 

"This turbulence is creating new opportunities on which we believe we are well placed to capitalise," he said.

 

 

 

"Cost pressures are a real issue for everyone in the dairy business this year and we are working hard to manage cost increases and grow our business through acquisition and additional volumes in all product areas."

 

 

 

Meadow Foods said that its sales were up by 22 per cent to £243m for the fiscal year ending March 2008 with total profit for the period reaching £5m.

 

 

 

Expansion aims

 

 

A key area of the group's expansion aims will be in strengthening its fats and sweetened product arms, which supply a number of products such as butter, anhydrous milk fat (AMF) and condensed milk.

 

 

 

The company said that capital investment already made in its manufacturing operations including the construction of a butter plant has allowed the company to take on new business ventures.

 

 

 

With the addition of further investment into Meadow Food's storage facilities and logistics, the company added that it was well positioned in the dairy market to tackle increased demand.

 

 

 

Besides stepping up its manufacturing capabilities, the group has announced that it is also looking to increase milk supply from farmers across the UK, in areas such as Cumbria, the North West and Wales.

 

 

 

Dairy supply

 

 

Recent findings by UK association DairyCo suggest that global uncertainty of the price of milk and other dairy ingredients will continue over the rest of the year.

 

 

 

A late season drought in New Zealand and record levels of US exports have resulted in the cost of butter, cheese and both whole and skimmed-milk powders all reacting in different ways, suggesting no clear market trends, the findings suggest.

 

 

According to the findings, provided by DIN Consultancy, the price of whole milk powder (WMP) fell by $100/tonne to $4,300/tonne in May and $200/tonne over the past 12 months.

 

 

 

With the US manufacturing only a small amount of WMP, a large gap between the cost of the product and its skimmed-milk powder (SMP) variant has been created, DairyCo stated.

 

 

 

The figures found that the price of WMP is already beginning to weaken due to generally lower EU market prices and some manufacturers switching to SMP over cost concerns.

 

 

 

Over the same twelve-month period, the cost of SMP has fallen by $1,350/tonne to $3,450 over. Nonetheless, the consultancy says that dwindling SMP stocks as the result of high US exports have put upward pressure on prices since March of this year.

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