Who will benefit from Westbury deal?

Published 21 January 16

With Arla taking full ownership of Westbury from First Milk, AHDB assesses who is going to benefit from the deal.

As Arla’s overall milk volume has increased in the UK, they have been in need of extra capacity at Westbury. Total control gives them the processing space they require and could mean more room to grow their UK milk field in the future. It also gives the European co-op the ability to invest. Investment in joint ventures is notoriously difficult to reach agreement on. Not least because different owners will have different investment priorities within their own businesses. Previously First Milk would have had to inject money in as well as Arla before improvements/expansions could occur. Now Arla will be able to independently invest in efficiency improvements as well as potentially extending the product range into added value areas.

From a First Milk perspective, the key benefit will be a reduction in costs. First Milk is a smaller organisation than it was when the Westbury joint venture was agreed, and as such, has a lower requirement for space at Westbury. The deal is likely to see First Milk making a multi-million pound saving per year, depending on initial exit fee and how often they still need to use the site. Another bonus is being able to still funnel milk through the site at peak milk production months and other pre-determined times of the year, allowing them an outlet for balancing milk. It is unclear whether this access will be at a higher ‘per litre’ cost, but at least the option is there for First Milk.

The benefit for the wider dairy industry is more difficult to assess. Certainly investment in the site should make the industry more efficient and could lead to more demand for GB milk. While the fundamentals of the global market will always drive price direction, having companies looking to invest in capacity and products can surely only be a benefit?