Tesco is increasing the price it pays for fresh milk by nearly 20% as the farming industry battles “unprecedented levels” of cost inflation.
The 520 British dairy farmers that make up Tesco’s Sustainable Dairy Group (TSDG) are set to benefit from the rise from 34.16p per litre today to 40.84p per litre in May. The farmers will also see an interim price rise in April to help address the soaring cost of animal feed, fuel, and fertiliser.
Tesco did not say what the implications would be for the price shoppers pay for milk in its stores. Back in January, the group’s Chief Executive Ken Murphy said the grocer would do its “very best” to manage inflationary pressures.
Industry data released this week by Kantar put grocery price inflation at 5.2%, its highest level since April 2012. Analysts have warned that food price inflation could rise above 10% by the end of the year as the war in Ukraine impacts energy costs and affects the price of grain and food oils.
“At a challenging time for the agriculture sector in the UK, we’re pleased to be offering our dairy farmers a significant increase in the price we pay for our fresh milk,” said Dominic Morrey, Tesco’s Commercial Director for Fresh Food.
“Our farmers work incredibly hard to provide quality, fresh food to our customers, and we recognise the critical role they are already playing in helping to transform the food industry, as we tackle issues such as climate change and food security.”
Bill Higgins, TSDG Committee Chairman representing Müller said: “Following the extreme volatility we as farmers have faced in recent months, Tesco has stepped forward to help us adapt the TSDG model to better reflect and support us through these unprecedented times. This only goes on to strengthen our 15-year collaborative relationship.”
NAM Implications:
- This will secure continuity of supply…
- …and serve as a pointer for others.
- When other mults follow Tesco…
- …anticipate shelf-price rises.
- (whilst Aldi & Lidl may choose to grow share by holding prices…)
