Tesco's New Cheese Group to Pay Above Market Rates

UK - Retailer Tesco has announced a new Tesco Cheese Group (TCG), which will guarantee dairy farmers an above market price for the milk they produce for Tesco’s own brand cheeses.
calendar icon 8 April 2016
clock icon 3 minute read

Tesco said the policy aims to help farmers by delivering a fair and consistent pricing model, providing them with the security and ability to plan ahead for the future.

The move builds on Tesco's Sustainable Dairy Group (TSDG), which was established in 2007, and pays a price to dairy farmers that Tesco says is calculated to help them manage the economic volatility of the market.

The new cheese rules will apply to Tesco’s British own-label Mild, Medium, Mature, Extra Mature, Red Leicester and Double Gloucester cheese.

The retailer's Commercial Director for Fresh Food Matt Simister said: "We have created this new cheese group to help us to meet customers’ needs whilst also establishing a long term sustainable livelihood for our farmers.

"By providing them with the assurance of our commitment, we are hoping to give our producers the confidence to invest so that they can deliver what customers are looking for in an efficient way.

"It is our hope that up to 200 more dairy farms across Britain who produce milk for our British cheese, in addition to the 600 producing milk through the TSDG, can work with us in partnership to create a successful and sustainable future for their production."

Mike Gallacher, CEO of First Milk said: "This new agreement we have concluded with Tesco is about establishing a long term, progressive and sustainable supply chain partnership over the coming years.

"While the current context is hugely challenging in dairy, we need to continue to keep focused on the long term ensuring that we put in place business models that can deliver for our customers, consumers and producers."

The new mechanism aims to provide transparent pricing which will be set regularly throughout the year. The price will reflect the market and will also award farmers a two pence per litre bonus in recognition that they must adhere to the Red Tractor assurance scheme, as well as additional Tesco welfare standards, to improve cow health and welfare.

However, National Farmers' Union (NFU) dairy adviser Sian Davies said: “On the face of it this looks like a positive move that supports British farmers supplying Tesco with own label cheddar, as well as other indigenous varieties, with a premium above the market price.

"Unfortunately this actually means a large reduction in the financial support provided by Tesco for farmers supplying them through First Milk and Parkham farms. The First Milk reduction will be immediate – with the winter supplement premium falling from 3.65ppl for March to less than 1ppl in the months to come.

“That said, even with this reduction, Tesco are doing far more on cheese sourcing than a number of other retailers, and are being transparent and open with their pricing mechanisms. We will continue our call for retailers to look at more sustainable ways of sourcing their own label cheese and other products in the dairy aisles.”

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