Arla welcomes Tesco's direct deal

Arla Foods UK plc, which supplies 40 per cent of Tesco's milk, welcomes the announcement that Tesco is to offer direct long-term contracts to named British dairy farmers raising the price farmers receive to around 22 pence per litre.

Arla Foods UK plc supplies approximately 600 Tesco stores with over 370 million litres of fresh milk each year.

In relation to today's announcement from Tesco, Tim J Smith, Chief Executive of Arla Foods UK plc said today: "We are delighted with this development. Tesco has provided a bold and creative step to help the dairy farmers who provide Tesco's customers with high quality milk.

"Although this move will have no financial effect on our own business, we will work with Tesco and Arla Foods Milk Partnership to quickly put in place the necessary systems and processes to ensure the earliest possible implementation of the new arrangements.

"We are confident the exciting new pricing deal will allow the AFMP members both a much improved financial return and the confidence to further invest in their enterprises."

Jonathan Ovens, Chairman of the Arla Foods Milk Partnership commented: "I believe that the members of AFMP will be delighted by the scale of the investment being promised by Tesco. We are today celebrating a significant improvement in the future prospects of those members whose milk will be part of this programme. We wholeheartedly support this move and thank Tesco for its commitment to us."

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Notes for editors:

1. Arla Foods sites at Oakthorpe (north London) and Stourton (Leeds) process pack and distribute fresh milk to Tesco every day.

2. Arla Foods Milk Partnership is comprised of over 1,600 dairy farmers who are contracted to supply all their milk to Arla Foods UK plc. By October 2007 their supply will represent 90 per cent of the total milk required by Arla Foods. Approximately 350 members will be affected positively by Tesco's announcement. On average, each produces just over one million litres per annum.

Arla Foods UK plc is home to some of the UK’s leading dairy brands including Cravendale, Lurpak and Anchor. Processing approximately two billion litres of milk a year Arla continues to be one of the UK’s leading dairy companies and a supplier of fresh liquid milk and cream to the top seven retailers.

Over 2,500 daily deliveries are made directly to stores nationwide and Arla brands can be found across the dairy category. As well as the leader of the butter, spreads and margarine sector, and a major supplier of other added value products including flavoured milk and cheese, Arla continues to build working relationships with Arla Foods Milk Partnership, a unique group of dairy farmers, which supplies around 90 per cent of Arla's total milk requirements.

Behind this leading business is a team of circa 2,800 people across the UK located at our dairies, distribution centres and head office.