Wiseman’s who sell only fresh milk saw pre tax profits drop by 42%, from £20.2m last year to £11.8m, on a turnover which climbed by 1%. The profit problems arose because the price they paid to farmers rose three times this year, and energy bills rocketed, but supermarkets, on whom Wiseman depends for nearly all their sales, refused to pass these costs on to consumers. Indeed many will recall that retail prices have been slashed of late.By contrast, Dairy Crest who sell big brands such as Country Life butter and Cathedral City cheese alongside fresh milk reported a profits rise of 9% on a revenue increase of 2%.
Its just as well that Dairy Crest has these brands. Profits in their dairy division which sells the milk saw profits plummet by 89%, from £10.9m to £1.2m, a shocking performance which puts the fresh milk supply problem into sharp relief.By contrast profits in the cheese division jumped by 32% due to higher selling prices, and butters and spreads profits grew by 16.5%.
For whatever reason, Wiseman seems to have held a the difficult milk situation together better than Dairy Crest, possibly because of scale (Wiseman supplies about a third of all fresh milk). But as previous blogposts have indicated, the Wiseman story continues to be a tale of erratic performance, and it is difficult to see how their current business model of one product and one sales channel can be made reliable and sustainable.Some investors point to their strong cash position, and much has been made of their new venture with New Zealand company A2 which may deliver innovative products such as a more easily digested milk for those who think they have a lactose intolerance. Then again though, Arla seems to have solved this issue with Lactofree.
Dairy Crest with its brands, its presence in cheese, butter, and spreads as well as raw milk, and its sales through more than just supermarkets seems better able to deliver the steady, predictable performance that suppliers, customers and investors like to see.