Tesco promises milk shake-up

Last Modified: 03 Apr 2007
By: Emily Reuben

They've complained for years about being milked dry by the supermarkets. Now Tesco offers dairy farmers more money for a pint.

For years dairy farmers have complained of being milked by the buying power of the big supermarkets. Last year alone, three farms a day went out of business.

So is the Tescos offer of 22p a litre the life-line they've been waiting for?

Tesco's buy a third of the milk in a farm we visited. Their new prices will benefit 850 farms who will see incomes boosted by more than £10,000. Consumers won't pay more, unless they opt for a new milk 'Local Choice' - which costs 3 p more per litre but is guaranteed to come from local farms.

Milk Prices have plummeted in recent years. So is Tescos higher price the good news it claims to be?

Milk over the years

In 1995 at litre of milk cost 42.1p. This broke down as:

24.5p - Farming 16.5p - Processing and packaging 1.3p - Retail gross margin (3%)

In 2005 a litre of milk sold for 50.9p

18.5p - Farming 16.8p - Processing and packaging 15.6p - Retail gross margin (31%)

Source Milk Development Council

In 1995 a litre of milk sold for 42.1p. The supermarkets were making a gross retail margin of 3% or 1.3 pence per litre. The processor - the ones who package the milk - got 16 pence. The farmers received 24 and half p.

Ten years later - consumers were paying more: 50.9 pence per litre. Yet the retailer's gross margin increased ten fold - to 15.6 pence per litre or 31%. The processor - was getting roughly the same, but farmers were getting much less per litre, 18.5 p -

But research obtained by Channel Four News - to be released later this week - says it may be too little too late for the UK dairy industry.

16% of farmers questioned by the Milk Development Council are thinking of giving up because conditions are so tough. So while Tesco's news is good for some - current conditions could yet leave many others by the wayside.