Scotland business

Muller plan to close dairy processing plants

Milk Image copyright Thinkstock

German-based dairy giant Muller has announced plans to close its Aberdeen and East Kilbride plants and is warning of 229 job losses.

Farms which send milk to the north-east dairy will be required to pay for the increased cost of transport.

The 43 farms' contracts will expire and they will have to find other buyers if they do not pay an extra 1.75p per litre.

Muller said it was looking at other growth options in Scotland.

The Muller Milk and Ingredients subsidiary is investing £15m over three years at its Bellshill dairy in Lanarkshire, aiming to expand its range of products.

But the staff union Usdaw said workers at the dairies would be "understandably devastated" by the company's proposed closure of their sites.

Spokesman Daniel Adams said: "We will now enter into a full consultation process to interrogate the business case and do all we can to save jobs. We are providing our members with the support, advice and representation that they require at this very difficult and worrying time."

In 2012, the German company bought Robert Wiseman dairy, which was based in East Kilbride. Last December, it bought Dairy Crest's dairy operations.

Analysis by Douglas Fraser, BBC Scotland business and economy editor

There's still lots of demand for fresh milk in Britain, but it's not growing much. And while dairy farmers are very pressured on price, the big dairies want to grow their businesses through efficiency and adding value in a wider range of products

Graham's the Family Dairy, based near Stirling, has invested in making and marketing butter and cheese as well as fresh milk. Muller, which is supplied by about 200 Scottish farms - more than twice as many as Graham's - has signalled it wants to invest in that wider product range as well. Its desserts division already dominates the UK yoghurt market.

If it follows the example of Muller's giant dairy in Bavaria, a bigger, more efficient Bellshill dairy would also expand into whey and bio-ethanol for fuel. And with a wider yoghurt and cheese range, it would reduce Britain's dependence on £2bn-worth of imported dairy products, much of that from France.

Bellshill is seen by the company as having the advantage of space to expand and fast links to distribution depots in Glasgow and Aberdeen. If the closures go ahead, it would mean only one Muller dairy serving the whole of Scotland.

Muller is judging it as more important to process close to the main population centres and to be close to the Ayrshire and Fife "milk fields", even if that means alienating the 43 big north-east supplier farms.

By charging Aberdeenshire farmers for the cost of getting milk to Bellshill, the market signal from Muller is that the north-east producers will have to become more efficient still if they are to cover the extra cost of getting to market. For other farm suppliers, that transport cost is absorbed into the farm-gate price.

The closure process means a 45-day statutory consultation period for staff at Aberdeen and East Kilbride in Lanarkshire.

The company says both plants have been operating well below capacity. In Aberdeen, 60% of capacity is unused.

Distribution depots are not under review, but some roles at the one in Aberdeen may be cut. However, it is being stressed that no decisions will be made until the end of the consultation period.

If closure of the Aberdeen plant goes ahead, all 43 farmers supplying the site will have to accept a 1.75 pence per litre charge to transport milk to Bellshill.

Those who do not agree to that charge will be given 12 months' notice of their contracts ending.

One of the 43 suppliers to the Aberdeen plant, Roddy Catto from Hillhead of Muirton Farm in Whitecairns, said farmers had "a lot to think about" ahead of a meeting with the company on Friday.

Mr Catto, who is also north-east chairman of the NFUS, said: "We need to hear more about the investment plans at Bellshill, what that might mean to the Muller business and balance that against any additional transport costs we would face as Muller suppliers were the Aberdeen site to be wound down."

"The meeting with Muller must leave all dairy farmers in the area with a clearer view on what these proposals will mean, so that farmers can take an informed decision now on their future in milk production."

Muller said that supply in the north-east far outstrips local demand for milk products. The East Kilbride plant is seen as inefficient in its limited range of flavoured milk and potted cream.

Chilled desserts

Andrew McInnes, managing director of Muller Milk and Ingredients said: "We aim to reinvigorate our fresh milk and ingredients business in Scotland and propose to invest to make Bellshill a centre of excellence for dairy, benefitting consumers, customers, employees and farmers.

"It is important to stress that the status quo is just not viable in the medium term. Our Scottish dairies are inefficient and costly which is putting a brake on the innovation and investment needed to stimulate new demand for dairy products."

He added: "We will enter the consultation with an open mind, and will rigorously assess the situation and listen to our colleagues before arriving at a decision."

Muller Milk and Ingredients division produces fresh milk for brands including Black & White, The One, freshnlo and Frijj. It can also produce butter for UK and international markets.

Aberdeenshire councillor David Aitchison said the authority was "deeply concerned" at the announcement.

"This has far-reaching implications on dairy farming in Aberdeenshire - an industry which is already struggling in a highly price-competitive market," he said.

"This is a further blow to an industry which is struggling to make Scottish dairy more competitive with overseas imports, risking the national viability of the entire sector."

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