CAUTIOUS OPTIMISM FOR ORGANIC DIARY AT MILK SUMMIT

25 September 2008

- Annual organic milk summit debates the challenges and opportunities for the Sector -

A message of cautious optimism echoed from delegates at OMSCo’s second annual Organic Milk Summit held at last week’s Dairy Event. The summit, chaired by Richard Macdonald, Director General of the NFU, brought together a panel of representatives from all areas of the organic milk supply chain to discuss the challenges and opportunities facing the sector over the next 3 years. The audience was made up of over 80 delegates from the industry.

The panel of key industry figures included Alain Guilpain from Tesco Stores Ltd, Hanne Sondergaard from Arla Foods, Karl Tucker from Yeo Valley Organic, Peter Melchett from the Soil Association and Nicholas Saphir, Executive Chairman of OMSCo. The current economic climate and its affect on the organic dairy industry dominated the agenda. Other topics covered included the emergence of new markets, the issues surrounding carbon emissions and other greenhouse gases, rising costs of production and farmgate prices versus retail margin.

Sales and the economy
• Nicolas Saphir, Executive Chairman of OMSCO, acknowledged the recent flattening in demand for liquid milk and yogurt but remains optimistic about the future, highlighting the substantial increase in organic cheese sales (+20%), a rise in demand for organic dairy ingredients and increasing demand from the export market which has ensured the overall market is still experiencing growth. The idea that market growth will result from a diversification of sales channels was echoed by Peter Melchett who sited the introduction by IKEA of organic milk throughout their restaurant chain as a particularly positive move for the industry
• Alain Guilpain, Dairy Category Manager for Tesco, confirmed the retailer’s continued support for the organic dairy sector but stressed that organic sales were under pressure as consumers are increasingly ‘shopping around’ and switching to value ranges to combat the affects of the credit crunch. Promotional activity in supermarkets has also doubled in recent months as brands compete to attract a price driven consumer
• The Soil Association’s Peter Melchett is upbeat about the sector’s future and stressed that ‘the health and environmental concerns that have historically driven organic purchase have not gone away’. He commented that perhaps the industry should consider adopting a ‘good food should cost more’ message
• The panel all agreed that during difficult economic times the success of the industry will be dependent on clear and unified communication. In a sentiment shared by delegates, Hanne Sondergaard from Arla urged that consumer messaging should continue to focus on explaining the benefits of organic milk. Yeo Valley’s Karl Tucker, declared his support for the recently launched Organic Trade Board as a unified voice for the industry.

Climate Change
• The mounting concerns regarding climate change and dairy farming were touched upon by Peter Melchett. An upcoming report from the Climate Change Commission is likely to put nitrous oxide and methane production under scrutiny and the organic industry needs to be ‘scrupulously accurate’ when communicating environmental credentials
• The panel was united in its wish to reinforce the environmental significance of grass-fed animals; this was strongly endorsed by Richard Macdonald and the NFU, who stressed that ‘quitting livestock and dairy is not a solution’.

Production and pricing
• Karl Tucker from Yeo Valley highlighted the rising costs for farmers with the increase in oil prices and the premium on organic feed reaching 80%. Nicolas Saphir explained that there is a need to fully understand the cost of organic production systems, and work is being done with Kingshay to establish the cost differential versus non-organic production systems.
• In a response to a question from the floor the panel reinforced that in addition to upholding the organic ethos, profitability for farmers remains a key factor moving forward.

The session was rounded up by OMSCo’s Executive Chairman, Nicolas Saphir as he reiterated his optimism for the future. “The spread of sales means we are selling all of our organic milk. From a consumer point of view value for money is exceptional - the organic shelf premium is down to as little as 14% - half that of when organic sales growth was at its highest.”

He went on to say, “the issues we need to address are how we continue growing and how to ensure we reach a balance in price, acceptable to both our farmers and the consumer. The industry has had a good internal relationship in the last three years but we need to ensure that tensions do not show over the coming months by continuing to communicate and work together.”

The summit took place on 17 September 2008 at in the Wolfson Centre, Stoneleigh Park during the Dairy Event. OMSCo would like to thank both panellists and delegates that attended.
- Ends -

For more information, images or to set up an interview please contact:

Fiona Reece or Emily Enright on 0117 330 72 82 (Fiona@fionareece.com / emily@fionareece.com ) or Abby Richardson on 07876 378 733 / abs_richardson@yahoo.co.uk

Notes to editors:
• Nicholas Saphir is Executive Chairman of the Organic Milk Suppliers Co-operative (OMSCo). OMSCo represents the majority of the UK’s organic milk producers, managing around 300m litres of milk per year from 400 farms stretching from Cornwall to Aberdeen. As such, it has a clear overview of the challenges and opportunities facing the organic milk sector. It works hard to build cooperation and instigate discussion throughout the supply chain, for the benefit of all.
• Alain Guilpain is Dairy Category Manager for Tesco Stores Ltd, the UK’s largest retailer of organic liquid milk and dairy products.
• Hanne Sondergaard is Deputy Managing Director of Arla Foods, the UK’s largest liquid organic milk processor.
• Karl Tucker is Procurement and Finance Director of Yeo Valley Organic, the UK’s largest user of organic raw milk, purchasing approximately 20% of total UK production.
• Peter Melchett is the Policy Director of the Soil Association, the UK’s largest organic certification body.