Milk Drinking Bolstered by Retail Price Cuts of 5p Per Litre

A dip into Dairyco’s data on the milk market shows that fresh milk volumes have grown by 2.5% in the year to June 2011, but the retail price paid per litre has dropped by 8% , due to the milk price war waged by supermarkets. So far, so not newsworthy.

What is surprising is just how long the price war has been going on. This is far from an occasional tactical practice to encourage people through the supermarket door. In the 12 months to June 2010 the average price per litre of milk was 66p. The average price in the 12 months to June 2011 was 61p.

And even though in the last few weeks some major retailers have put the price back up, ASDA still remains at the lower level, Tesco is selling its Creamfield whole milk at 44p a litre, and Morrisons have just announced that their 1% fat milk is on promotion at 50p for four pints.

All claim that promotional prices have not affected what they pay to farmers, but look at it another way. The fact that supermarkets can reduce prices by so much and for so long shows just how much they were making from fresh milk in the first place. Indeed Dairyco analysis tells us that for every litre of milk sold in 2008/2009 retailers took 18.8p, processors 20.4p, and farmers 25.8p. In the following year, retailers took 22.4p, processors 18.9p, and farmers 23.8p.  

The price reduction has badly hurt sales of organic milk. In the 12 months to June 2011 volumes dropped by 7% as the retail price of organic stayed at 81p per litre, a 33% premium to conventional milk.

Sales of filtered milk,( Cravendale being the best known brand), have now levelled out at 338 million litres, possibly due to a price rise of 2p to 78p, a 28% premium to standard.

Award for best performance goes to the low fat sector, defined as milk containing 1% or .75% fat. Sales grew to 362 million litres,an increase of 24%.

And the one area defying a generally price conscious consumer response is Jersey and Guernsey which maintained its, admittedly tiny, sales level, despite costing nearly £1 per litre.

Dairy Crest v Wiseman – Where Would You Put Your Money?

Dairy Crest and Robert Wiseman Dairies have just announced annual results. Both process huge quantities of milk (2.1 billion litres for Dairy Crest and 1.6 billion for Wiseman) but their business models could not be more different.

Wiseman supplies only fresh milk, sold mainly under a retailer’s own brand name. Dairy Crest is diversified, selling fresh milk, plus cheeses and spreads. It owns well known brands such as Cathedral City and Country Life, it also processes for retailers' own brands, and is present in France as well as the UK.

A glance at this years results might suggest backing Wiseman. Its sales were up 4.5%and profits up by nearly 60% although this is flattered by some one off benefits. It has very low debt, and strong cash flow.

Dairy Crest saw sales fall 1%, with profits before exceptional items up 5%. Debt is being paid down but is still £337m.

Investors responded by marking Wiseman’s shares down 1.8p to £481.5, Dairy Crest’s shares rose 8.9p to close at £362.5p. Those into share movements will know that Wiseman sells on a higher multiple than Dairy Crest, but even so, it’s an odd reaction.

Backing a company is not about the past though, it’s all to do with likely future performance.

So, if you like the sound of a diversified portfolio where poor performance in one segment can be offset by better news in another, or if you feel that brands are best, despite requiring huge advertising and promotional spend, because they give you more control than being at the whim of a retailer contract renegotiation, and debt does not scare, then Dairy Crest is for you.

If on the other hand you are confident that the company supplying retailers’ own brands is the lowest cost producer in the market place and so cannot be undercut on price, that it has the management talent to read the market place and anticipate where the major retailers are likely to want to introduce own label versions of a product, and the company has sufficient cash to invest in the new technology required, then Wiseman is the way to go.

Both companies have been successful with their chosen business model. Dairy Crest announced a 9% rise in sales of their 5 major brands, and chief executive Mark Allen, being interviewed about the results, made a point of stressing that diversification is good as the cheese division had a very difficult year whereas dairies performed well, conversely he reckons that over the next year cheese will recover but dairy struggle.

Wiseman competes effectively in the own label supply market, having increased share of liquid milk from 28% to 31%. It seems to be valued by retail partners, winning several “best supplier” awards, and chosen by Tesco to process its filtered milk competitor to Cravendale.

However, there are issues with both. Having already got 31% of a low growth market it is difficult to see how Wiseman will continue to expand its revenue, and Arla’s billion pound processing plant may mean that Wiseman loses it lowest cost supply status and struggles to defend what it already has. The company acknowledges the challenge of growth but feels the way through is to supply higher margin, more profitable products.

Dairy Crest’s 9% growth in sales for its key brands disguises the very heavy costs of advertising and promotion. The issue of costly promotions was addressed in my blog post in January, and work done by Bidwell’s Agribusiness on behalf of Dairyco shows that in the year to March 2009, 73% of Cathedral City was sold on promotion, 52% of Clover, and 60% of Country Life. They too face stiff competition from global dairy processors.

Despite the issues there is room for both business models in the short term, and longer term too, possibly helped by sensible pursuit of mergers and acquisitions.

Consumers and Shoppers – The Importance of Understanding the Difference.

From The Institute of Grocery Distribution comes a timely reminder of the difference between shoppers and consumers, consumers being the person who ultimately eats or uses a product and the shopper being the one who buys the product from the shop. Sometimes they are one and the same person, but not always. An example would be mothers buying food for the family where Mum is the shopper but the family eats what she buys (mostly!). Or in the case of a gift, the shopper buys but the consumer is the recipient. And when in the store, what someone feels as a consumer can be trumped by the immediacy of making a shopping choice.

The notion of differentiating the two has been around for years, but the point the IGD makes is that shopper understanding has become a multi million pound science. Retailers, engaged in a ferocious war for market share, are spending vast sums on understanding their shoppers in a climate where people are very picky about how they spend their money, and low inflation makes it doubly hard to get sales growth.

So, in this shopper is king (as IGD calls it) environment, suppliers approaching a retailer stands a better chance of getting heard if they bring deep knowledge about the way people shop for their particular product. Finding fresh insight is not easy given the enormous amount of data possessed by the retailers themselves. Tesco for example via their 83% owned subsidiary Dunnhumby reads the data of 22 million Clubcard holders every year.

Having said that, increasing sales is not just a matter of numbers, its also about psychology. IGD tells us that 70% of brand choices are made in store, and that 68% of product purchases are made on impulse. This seems a high number but it is not difficult to imagine products suddenly finding themselves in the shopping basket as a result of a stunning display, a slot alongside an obvious partner, or simply because it solves a shopper’s problem like what to dish up for dinner.

The snag with all this of course is that it stretches suppliers’ profits even more thinly. Not only do they have to be able to give retailers the margins they want, and cough up increasing sums for value based promotions, they now have to match retailers in shopper understanding, as well as spend money on marketing to build their brands with consumers.

This may give a clue as to why the big branded manufacturers want to get bigger. Size gives them the economies of scale they need to handle retailer demands both in the UK and globally, for the same retailer game is being played world wide. Such pressures may help explain moves like the Kraft bid for Cadbury.

It is clear though that anyone who supplies products under a retailers own brand name must be very conversant with shopper behaviour.

Which leads to an interesting dilemma for the levy boards - DairyCo, EBLEX, BPEX et al. Are they better spending money on broad messages to the consumer, as EBLEX have just started to do again, or would it be more productive to carry out forensic, in depth research on shoppers.

I'd vote for shopper research on the grounds that the findings would be valuable to all producers, large or small. No concrete case has been made about whether generic advertising works, yet a thorough understanding of how people shop a category could lead to fresh ideas and a much needed rise in sales.

Hard Cheese – The Baffling Behaviour of Branded Cheddar Sellers

Dairyco have just published figures for cheese sales in the 52 weeks to end December 2009. The top line picture is that total cheese sales are up, by 4.2% in tonnage, helped, as Dairyco points out, by a very modest price rise of just 1p per kilo.

The detailed figures reveal one startling change, namely that the price of branded cheddar dropped by 29p per kilo or 5% whereas that of supermarkets’ own label increased by 1p. This means that branded cheddar is 7% cheaper than the supermarket equivalent, whereas all received wisdom would say that it ought to be at least 10% dearer to pay for the advertising and promotional costs that accompany a branded product. At the end of 2007, branded cheddar cheese sold at £5.63p a kilo versus own label at £5.21p, a premium of 8%. At the end of 2009, branded cheddar sold at £5.99p versus supermarket own label at £6.42p.

The branded guys will no doubt be celebrating spectacular sales. The price cut meant that their volumes grew by 21% in 2009 and their sales value by 16%. The own label people acted very differently. On their standard cheddar they took a modest price rise and achieved increases of just under 1% in volume and value.

So what might be the right strategy - to maintain price, volume and profit margin, as retailers did with their own brands, or to cut prices, get higher volume, but sacrifice margin.

We will never know exactly what the financial outcome of these heavy promotions is. All we will hear during investor presentations is that brands saw terrific growth. However, the chances are that the branded sellers made much less money than own label.

Here’s why. At a price of £5.99p per kilo, a 30% margin to retailers and a 50% cost of goods the volume increases achieved would deliver the same profit as holding the price at 2008 levels. If either the cost of goods or retailer margin is higher then the promotions lose money. Add to this a likely payment to the retailer to run the promotion, a possible demand for cash margins to be maintained even though prices are reduced, and overtime running at factories to produce the incremental volume then losses increase.

The supermarkets will be laughing their socks off. Their total cheese sales are up, and their profits will be too as all the expensive price cutting promotion costs will have been borne by the brands.

The branded processors behaviour is baffling. Deep price cuts are a zero sum game, for as soon as one company breaks ranks the others follow to avoid losing market share, and they are generally ruinous to profits.

We can speculate as to how any shortfall in profit might be made up. The reasons for declines in farmgate milk prices get lost in a terrific snow job from processors who blanket us with tales of unfavourable exchange rates and world commodity prices. But one is left wondering whether the drop in liquid milk prices went some way to funding all these cheese promotions.

UK Milk Market – Examining Opportunities for Growth

Tetra Pak, multi billion pound maker of drinks cartons, has just published a review of the UK liquid milk market, setting out where growth opportunities might lie.

The company estimates the total market, retail and catering together, to be around 6 billion litres, with sales down 1% year on year. Growth in retail sales is partly offsetting a decline in catering. (For comparison, DairyCo’s latest numbers for retail show the market to total 5 billion litres, up 0.4%).

According to Tetra Pak, functional products with added health benefits are the biggest growth opportunity. They point out that products like Unilever’s Flora Pro Activ which promises lower cholesterol, and Lactofree from Arla are growing strongly, and increasing health consciousness will drive growth still further. This has apparently happened in America where products with added health benefits are booming.

Whilst Tetra Pak are correct to say that keeping healthy is a worry in the UK, launching successful products will not be easy. Health benefits do not trump a poor tasting product, so much research and development will be needed to ensure that the products not only deliver their claims but also taste great, and vast marketing budgets are needed to explain a benefit to a public generally mistrustful of anything which smacks of being modified.

A more straight-forward opportunity identified by Tetra Pak lies in the flavoured milks market, where, helped by the launch of exotic varieties, the market has grown to 200 million litres in 2009. An EU ruling that subsidies for milk now apply to secondary as well as primary schools may encourage teenage consumption. And at the youngest end of the age scale, Tetra Pak has noted a rise in sales of baby and toddler milks.

One of the quirkier facts in the review is that goat’s milk is the fastest growing sector of all.

And so to brands and innovation. The Tetra Pak review shows that the share of branded milks has grown to over 20%. EU regulations whereby milks of varying fat levels can be labelled as milk, rather than milk drink, allowed a new sector to emerge, led by Wiseman’s “The One %". Cravendale filtered milk from Arla with its longer shelf life has been a shining example of innovation. The product is sold at a premium and the sector has come from nowhere to be now worth £229million. Lactofree is another branded success. All demonstrate that premiums and innovation are possible even in a so called commodity market.

Anders Olsson of Tetra Pak reckons that more creative thinking and better consumer understanding would lead to a more dynamic milk market. He says that “The current state of mind is auto-pilot”. It may sound harsh but he has a point. Liquid milk is a huge but static market, and there is a crying need for innovation to reduce dependence on sales of low margin standard milk to major retailers, to get the value of milk sales up, and to return some of the higher value margin to milk producers.

Notes from DairyCo’s consumer sales audit for the 12 months to 1st November 2009
- the liquid milk market is up 0.4% in volume and 6.7% in value
- filtered milks grew by 10%
- organic milk sales are down 2%
- Jersey and Guernsey are doing well off a small base, up 13%
- UHT milk is down 2%, but a new sector, sterilised milk, is growing rapidly albeit is still very small. DairyCo thinks this is because it offers a longer shelf life.
- soya milk sales are down 5%

Milk Drinking on the Up Despite Price Hikes

DairyCo has just published liquid milk consumption figures for the 12 months to 14th June 2009, and they show some striking trends.

All those concerned about the effect of price rises on consumers’ fresh milk buying habits need not have worried. Despite an average 11% increase in prices in the last twelve months, from 62p to 69p, the total market has kept on growing and has now reached just over 5 billion litres. Which says something about the importance of milk to the British diet, much about a complete lack of awareness by the average consumer of how much they are paying for their daily pinta, and is a tribute to some of the innovative products launched into the market. It also illustrates how nonsensical it is for major retailers to slash milk prices - this is a product which does not need price promoting.

On the innovation point, the figures show that milk is not just a big undifferentiated commodity market. A careful look at what’s important to consumers results in successful new products. Filtered milk is a good example. Pioneered by Cravendale, premium priced, and sold with the consumer benefit of staying fresh for longer, filtered milk continues to grow its volume and now accounts for about 6% of all milk sales. Another innovation is milk with 1% fat which has found a niche between skimmed with no fat at all, and semi skimmed with 2% fat.

Equally, not listening to consumers results in problems. A case in point is modified milk which lost half its sales in the last 12 months and is about to expire completely. Consumers just don’t want a fresh and natural product like milk interfered with.

A couple of other interesting trends emerge. The organic milk market has dropped by just 2 million litres to 167m, but is holding up reasonably well compared with other organic products. Part of this is due to less aggressive price increases. Whereas regular milk increased average price by 7p per litre, organic increased by 4p. Jersey and Guernsey which hardly increased price at all have held volume, albeit this is still a tiny sector.

Doorstep delivery sales continue to fall, down 11% year on year. With an average price of 98p per litre, this is perhaps not too surprising. But, it still accounts for 6% of all milk volume sold, and the independent milk producer might well be able to build a good business if they could bring the price nearer that of the supermarkets.

For some reason sales of soya milk have dropped by 8%, despite an average price reduction. Possibly at 90p a litre it is just too expensive when budgets are tight.

All in all though, liquid milk looks like a healthy market in all senses.

Livestock and the Environment - Where is the Voice of Farming?

Livestock and the environment are in the spotlight again, and the frustrating thing for anyone involved in food or farming is the one sided nature of the debate. All the media coverage boils down to one message – “meat and dairy environmentally bad so eat less”. We hear little about the food value of the products, the role that livestock plays in keeping Britain’s countryside beautiful, or the steps that agriculture is taking to reduce its environmental impact. The headlines are worrying because a cut back in consumption will eventually affect the price paid to farmers for their products, and it is difficult to understand why the industry seems voiceless and invisible.

Capturing most headlines is the proposal by the NHS to cut back on the amount of meat it serves to patients. This, they say, will help reduce their carbon footprint, and will be beneficial to the long term health of patients. Whilst those with sick loved ones might worry about whether recovery will be as quick without the benefit of a balanced diet, and the cynic might wonder whether the driving force is to reduce NHS costs, nonetheless the fact is that the NHS serves up millions of meals and such a move will impact meat sales.

Less headline grabbing is the report “Food Futures” by think tank Chatham House.
Read the detail and you see a real anti meat and dairy bias. Meat and dairy are blamed for health issues. Global agriculture is said to be responsible for 14% of non carbon greenhouse gas emissions, and that a third of this is due to livestock. And they quote an EU report which says that meat and dairy are the main source of green house gas emissions in the food and drink sector. They trot out the old statistic that a kilo of grain fed beef requires 15 cubic metres of water versus cereals which require between 0.3 and 4 cubic metres, forgetting to mention that most livestock in the UK is pasture fed. Most alarming of all, the Chatham House solution is for government to dictate what we can and cannot eat, saying “The food system will need to reflect society’s choices as much as individual preferences”.

Then last week at the Meat and Livestock Commission’s Outlook conference a speaker from the Food Climate Research Network said that eating meat had to become more environmentally viable either by the industry reducing emissions or people eating less meat. She said that a meat tax might help and that there were moves to add the cost of emissions to the price of a food in order to encourage consumers to rethink what they are buying.

Fortunately a more balanced view of things emerged at the same conference in the shape of Mike Coupe, trading director of Sainsbury who said that cutting carbon emissions by limiting food choice is a “form of communism”, and that a tax would be unlikely to change people’s meat consumption unless it was huge.

The key point is that the issue of agriculture and climate change is not going to go away.

Few will dispute the need to take climate change seriously. But the debate is totally one-sided. Consumers not getting a balanced message about the value of meat and dairy products and the livestock which supply them.

So what should be done?

In a nutshell, simple fact backed messages must be communicated regularly and by independent, respected sources as well as the industry itself. A one off burst of activity just will not work.

There are three messages to convey

1. Meat and dairy are high protein foods, containing vitamins and minerals essential to good health. As the Food Standards Agency says "Meat is a good source of protein and vitamins and minerals, such as iron, selenium, zinc, and B vitamins. It is one of the main sources of vitamin B12, which is only found in foods from animals, such as meat and milk.”

The FSA also says “ Milk and dairy products such as cheese, yoghurt and fromage frais are great sources of protein and vitamins A and B 12 . They're also an important source of calcium, which helps to keep our bones strong. The calcium in dairy foods are easy for the body to absorb”.

2. Without cattle and sheep grazing the hills and moors our countryside would become overgrown in just a few years

3. Livestock farming has a plan to reduce greenhouse gases. (Assuming it does have a plan of course. A trawl through websites from the NFU, Dairyco, the NBA and the NSA does not turn up an easy to read summary of how the industry is tackling climate change. Contrast this with the National Cattlemens' Beef Association of America page on beef cattle and the environment.)

Funding for the information campaign can be found from any number of places. For a start I’d suggest ditching the Red Tractor and redirecting the levy funds, on the grounds that the Tractor means no more to the average consumer than a Union Jack.

Then, what about forensically examining the evidence that Meaty and Lamby are persuading people to buy more meat. Would the funds be better spent supporting a targeted campaign.

The big question is why the industry is not doing more about an issue which has been on the table for years, and which is growing in importance.

Dairy Products Market 2008

Here’s a look at the Dairy Products market in 2008, courtesy of the Grocer. All data is for the 12 months to end October, and supplied by Nielsen market research.

It was a year when huge jumps in food prices collided with credit-crunched consumers reining in spending. Unsurprisingly there were changes in how people shopped for dairy products, but not perhaps as many as might be imagined.

Consumers bought roughly the same volume of products, despite dairy price inflation of 13.4%. There was some trading down to own label, notably in the butters and spreads sector, but by and large the big well advertised and promoted brands held on to their positions with the weaker ones struggling. There was a turning away from products sold as functional or fortified, with the exception of Danone Activia with its promise of a revved up digestive system. And Organic slipped back but is not yet in freefall.

Butters and Spreads
Total value sales were up by 17% to £1.1bn, with own label growing almost twice as fast, up 31%
Total volume sales were down by 1.1%, but own label grew by 4.3%.
A couple of grocery trade spokespeople commented that spreadable butters are growing fast because they combine convenience with a natural and healthy product. By contrast fortified spreads are losing sales because consumers are confused about why they should buy them, and they are more expensive.
Perhaps echoing the natural message, Lurpak butter is the number one brand for the second year running, beating Flora.
This is a sector where organic is struggling with Yeo Valley’s value sales up by only 6% in a market where inflation was 13%, meaning that volume sales must have been well down.

Cheese
Total value sales grew by 11.5% to £2.2bn. Own label grew slightly faster, up 11.8%
Its good to see that Cathedral City, is still the biggest brand in the market, owned by Dairy Crest, and British of course.

And a cheer for Wyke Farms which grew by 30% and is now the eighth biggest cheese brand. Here’s hoping that it is making money, and continues to show that it is possible to compete with multinational companies.

Yogurts
Total value sales were up by 7.7% to £1.9bn, and volumes grew by 1%. This is one category where own label is not growing as fast as branded products.
According to the Waitrose buyer consumers are flocking to Natural and Greek yogurts because they are seen as healthier.
Organic yogurt Rachel’s Dairy bucked the organic downturn and grew by 14%, but Yeo Valley clocked up a 1% growth.

Yogurt Drinks
This market is struggling. Value sales despite inflation were down 2.6%, and volume sales down by 8.3%.
The buyer for Booth’s supermarkets reckons that this is a market where consumers are cutting back because of price.

Fresh Milk (Additional data from DairyCo)
The total fresh milk market grew by 14.1% in value to £3.2bn, and 0.6% in volume. People are still purchasing as much fresh milk as they ever did.
Filtered milk, led by Cravendale continued to grow, up by 29%, but the modified milk market is fast disappearing, down by 35%, and is another example of consumers resisting a natural product which has been tampered with.
The Organic milk market was stable and Yeo Valley grew by 46%. There is anecdotal evidence that mothers like to buy organic milk for young children, even though it costs more than standard.
Wiseman’s “The One” milk did well growing by 48%.

NB

The one thing to bear in mind when looking at these numbers is that they are for the 12 months ending October 2008, about when recession truly started to bite. A look at data for the last quarter of 2008 may show some differences.

Jargon Busting - What is "Provenance"?

Its amazing how jargon creeps into business language. "Provenance" is a classic example. No food discussion passes without reference to provenance. Farmers are regularly told that having provenance is big market opportunity, and that people are more interested in provenance than ever before. And yet, according to a piece of research on the topic published by DairyCo(www.dairyco.co.uk) 63% 0f consumers questioned in a survey replied "don't know" which asked what the term provenance meant to them.Indeed an informal poll in my local pub showed 90% not knowing what the word meant. So an easy lesson is never to use it when selling to the general public.

Which is not to rubbish the idea of provenance, defined by the Oxford English Dictionary as "The source and origin of a product, it's history and pedigree". Many consumers do care about where their food comes from.

The DairyCo research offers a good guide to the type of consumers most interested in the origins of their food, and what particular aspects of food production concern them most, or appeal to them most. Whilst it is mostly about dairy products, the findings apply just as much to meat, eggs, fruit and vegetables as cheese or milk.

Much of the research builds on what is already known. It tells us that the consumers most likely to be worried about where their food comes from are older, richer, and well informed about food matters. The positive things they value are freshness, high quality, excellent taste, naturalness, tradition. In rural areas, supporting local farmers, local businesses, and the community are of great interest, and organic seems to be most valued in towns and cities. The issues that most worry consumers are connected with health and food safety, as well as ethical issues. So traceability,transparency, additives, pesticides, animal welfare, food production methods and food miles are all relevant. The research also confirms the increase in sales of local foods.

Where the research does shed more light is in the following areas:

1. Selling on a local foods message is not the only way to benefit from consumers' interest in how and where their food is produced.Concern about food is more to do with a consumer way of thinking than location. Indeed the research warns that a local message can be confusing because some consumers see local as within a 10 mile or so radius whereas others, particularly Scots and the Welsh, see local as from their country.

2. If deciding to sell in a small radius of the farm, it is not enough just to say you are local, the product must be accompanied by another benefit, which has to be explained and supported. An example might be freshness -"from the cows to your door in less than 24 hours". Or the particular steps a farmer takes to protect the environment, or the history of the farm and the product.

3. If wishing to sell a long way from home, for example to London stores, then locally based, community messages are less relevant. Instead, selling points which address food safety and health concerns can be highlighted, such as total traceability, or pesticide and additive free feeding regimes. Environmental and animal welfare standards can be emphasised. Again, any claims must be explained and supported.

As well as consumers, the researchers spoke to people in the dairy industry and from them identified several new opportunities, which could also be relevant to other products. The three with the most appeal are county specific products, products from named farmers, and a range of pre-prepared meals. Similar products do exist, so thorough market research is needed to check the competitive scene before proceeding.

There we are then. Provenance is of interest to consumers - but best banish the word from use unless talking to a food jargon specialist. These can be found in consultancy, marketing departments in processors and retailers, and government departments. Not the person in the street - who is the one person that matters.

Milk Market Data Quarter 1 08

DairyCo, the new name for the MDC, has just published liquid milk market data for the 12 months to April 2008. The analysts there tend to concentrate on annual figures but a better feel for trends can be got by looking at shorter term numbers, so here's an update on what has been happening over the last 3 months.

Sales of standard Pasteurised milk have dropped very slightly as retail prices have tipped over the 60p mark to average 61p per litre. This is the first hint that consumers might be buying a bit less in the face of continued price rises.

Organic sales have grown by a small amount with average prices being stable at around 76p per litre. This gives additional support to the theory that there won't be much change in organic sales until prices go over the 80p level, at which point the gap between standard and organic will be two price points (70p and 80p), and organic sales will drop again.

Filtered milk, with its selling benefit of staying fresher for longer, grew by 6%. This is still a growth rate that would please most people, but it is a substantial slowdown on previous trends which saw growth at over 20%. Filtered still sells at a 2p premium to standard.

Modified milk sales dropped by 9%, and although this decline is alot less than the 35% drop seen previously it does further indicate that consumers just don't want a natural food like milk to be tampered with.

And finally, Channel Islands milk sales and prices have not changed at all in the short term, and neither have Soya sales and prices.