November 15, 2011
Robert Wiseman Dairies amid plummeting profits is investing GBP2 million (US$3.2 million) into the launch of a type of milk aimed at people who typically struggle to stomach the drink.
The Scottish dairy group has formed a joint venture with A2C, a New Zealand dairy that sells a range of a2-branded milk products that do not contain a type of protein that can cause digestive discomfort and have proved popular in Australia.
A2C will also inject GBP2 million (US$3.2 million) into the venture.
Robert Wiseman hopes to launch similar products in Britain next summer as part of its "Bringing People Back To Dairy" initiative.
The milk, which will be processed at Robert Wiseman's dairy near Birmingham, is aimed at consumers who are intolerant of milk but not diagnosed as lactose intolerant.
Studies have shown that as many as one in five people find it hard to digest milk, but only one in 20 in Britain is believed to be lactose intolerant.
The tie-up comes as Robert Wiseman posted a 42% fall in pre-tax profit for the first half as it continued to be caught in a pincer between rising input prices and aggressive retailers keeping a lid on the prices they will pay for milk.
The dairy, which has grown from humble beginnings at Robert Wiseman Sr's family farm in East Kilbride, said that it was hurt by three increases in the amount paid for raw milk since March 2011 and by rises in other costs.
Profit before tax was GBP11.8 million (US$18.8 million), down from GBP20.2 million (US$32.1 million) in the same period last year.
Robert Wiseman, which supplies a third of the fresh milk consumed in Britain, warned that the squeeze on its margins could intensify if costs rose further, but said that it hoped to make efficiency savings to offset the pressures.
It said that it would seek to "restore margins to an acceptable level" as market conditions improved.
Wiseman's turnover increased by 1% to GBP457.7 million (US$727.3 million) in the half-year, in what it described as a "robust performance" that benefited from a deal to supply all The Co-operative Group's own-label milk from August.
A new organic milk contract with Tesco will also help it to boost volumes.
Shares in Wiseman, which have fallen by nearly 10% over the past three months, were up by GBP0.04 (US$0.06), or 1.4%, at 285.22 in morning trade.
Nicola Mallard, an Investec Securities analyst, said that profits were ahead of expectations.
She added: "The environment for liquid milk remains difficult, with retailer selling prices reduced again in the new round of price competition and further raw milk price increases implemented in recent months."