Cheddar Supply
Chain Margins
2013/14
Contents
Introduction: About this report
4
Executive summary
5
Market developments
6
Dairy farm business income
8
Cheddar markets
9
Mild Cheddar margins
11
Mature Cheddar margins
14
Conclusion
17
Appendix
18
While the Agriculture and Horticulture Development Board, operating through its DairyCo division, seeks to ensure
that the information contained within this document is accurate at the time of printing, no warranty is given in
respect thereof and, to the maximum extent permitted by law, the Agriculture and Horticulture Development Board
accepts no liability for loss, damage or injury howsoever caused (including that caused by negligence) or suffered
directly or indirectly in relation to information and opinions contained in or omitted from this document.
© Agriculture and Horticulture Development Board 2014. All rights reserved.
All figures within this document are as accurate as possible; however, the nature of the information means that
all reported figures are averages and approximations. This means that there is a small margin of error from precise
figures for individual companies, retailers, contracts, etc. However, all changes should be representative of what
has happened over the past decade.
3
Introduction: About this report
How the Cheddar Supply Chain Margins report is compiled
Since 2005, DairyCo has been identifying the main beneficiaries within the dairy supply chain when
farmgate, processor, retailer or dairy commodity market prices change. This information was historically
collated into the annual Dairy Supply Chain Margins report1.
The information sources for these reports have been farmgate milk prices, wholesale and retail prices on
Cheddar cheese. From this data, DairyCo has estimated the gross margins2 at processor and retailer level,
and compared these with calculated gross margins in the previous year to highlight short-term trends. A
comparison to gross margins ten years ago is also provided, to indicate longer-term trends.
The Cheddar Supply Chain Margins report aims to answer the question of who benefits from changes in
prices along the supply chain in the sale of mild and mature Cheddar. This 2014 report provides evidence
on the average gross margins made across the 2013/14 milk year, which ran from April 2013 to March
2014.
Farmgate prices are included but not farm gross margin data as this report focuses specifically on post
farmgate margins; information on farm margins can be found in a number of other studies currently
available in the industry.
How should this information be used?
This report provides the transparency and data required to improve farmers’ understanding of their supply
chain. It must be noted that the data provided is an average indication across each part of the supply
chain and figures for individual businesses will vary.
How to access up-to-date information throughout the year
The Dairy Market Weekly and Monthly reports from DairyCo act as a regular guide to changes in the
market and prices. Go to dairyco.org.uk/sign-up to sign up to receive these.
1
Reports prior to 2013 include liquid milk supply chain margins.
Gross margin is the difference between the selling and buying price. For the purpose of the report, gross margins are calculated as unit
gross margins, measuring the unit selling price less the unit cost price (in pence per litre of milk terms). Margins do not account for sales
or production costs and are, therefore, not indicative of profit levels.
2
4
Executive Summary
Following on from a year of challenging global and domestic production conditions in 2012/13, gross
margins along the UK Cheddar supply chain experienced some notable changes in the 2013/14 milk
year. The reduced milk volumes in 2012/13 contributed to a depletion of Cheddar stocks in 2013 and the
impact of this continued to affect wholesale markets through 2013/14. Although the supply of raw milk
in major exporting countries improved in this year, the volumes were still not sufficient to keep up with the
growth in global demand for dairy products. Commodity markets responded to this and remained buoyant
over the year, adding support to UK farmgate prices.
The Defra average farmgate milk price rose to 32.6 pence per litre (ppl) in 2013/14, around 4ppl higher
than the average for 2012/13, despite the supply of raw milk in 2013/14 being at its highest level in ten
years. In addition to the robust world wholesale markets, other domestic factors also influenced the rise in
farmgate prices over the year. A number of processors were aggressively competing for supply and the
impact of this on farmgate prices was notable.
UK wholesale Cheddar prices were relatively stable over the year following a climb in prices at the
end of 2012/13. Consumer demand was stable but domestic supplies had not caught up enough to
fully compensate for the drain on stocks from the previous year. Although domestic Cheddar production
improved through the latest milk year, it still lagged behind 2011/12 levels and, consequently, Cheddar
imports in 2013/14 increased by 8% to around 114,000 tonnes in order to meet the supply gap.
Wholesale and farmgate milk prices were both at higher levels in 2013/14 when compared to previous
years. Despite this, price competition between the big 5 retailers and the discounters (eg Aldi, Lidl)
restrained price increases for Cheddar at the retail level. In addition, sales of budget private label Cheddar
grew 16% by volume, while sales of branded Cheddar fell, as retailers moved to provide more of a value
offer to consumers. Subsequently, a key finding of this report is that retailers’ gross margins for Cheddar
have decreased over the year, albeit from historically high levels.
Processor gross margins were largely stable over the year, as farmgate prices moved in line with the
increased wholesale prices. However, processor gross margins may come under pressure in the coming
year as global wholesale prices have moved to lower levels in mid-2014, as markets adjust to the
improved global supply situation. In addition to the pressure exerted by the rebalancing of world and UK
wholesale markets, a continuation of intense price competition at retail level could add further pressure to
processor margins.
5
Market developments
UK milk production was one area of significant change in 2013/14. The total volume of milk produced
was the highest since 2004/05 at 13.7 billion litres. This was in stark contrast to 2012/13 when volumes
dropped below 13 billion litres, primarily due to challenging weather conditions.
Global milk production was also affected in 2012/13 as wet weather and drought hit key exporting
regions such as New Zealand and the US. World commodity markets in 2013/14 continued to be
influenced by the impact of tight milk supplies from the previous year. Despite the year-on-year growth in
global milk volumes in 2013/14, there was still not enough available supply to keep up with the growth in
demand. In addition, the global stocks situation was poor; the closing quantity of butter put into EU private
storage aid (PSA) in 2013 was 33% lower than in 2012.
Figure 1: World commodity prices
*
Source: USDA.
* No data collected
China’s domestic milk production fell sharply during 2013 as a result of disease and regulatory changes
to its domestic industry. Consequently, its import demand for milk powders rose significantly, adding further
pressure to already high wholesale prices. The average global wholesale price for whole milk powder
(WMP) in 2013/14 was almost US$1,300/tonne (37%) higher than in 2012/13 and well above that
of Cheddar. The relatively better returns are likely to have encouraged manufacturers to divert milk to the
production of milk powders in preference to cheese, affecting the availability of cheeses.
In line with global markets, UK wholesale prices also remained high during 2013/14. Prices for fats and
skimmed milk powder (SMP) rose sharply at the start of the 2013/14 milk year. Cheddar prices increased
at a steadier rate than fats and powders, but rose to around £380/tonne higher than the relatively
flat prices over the previous few years. Attractive returns from the fats and powders markets provided
opportunities for processors to recoup the added input costs arising from high farmgate prices for raw milk.
Therefore, it is likely that any milk not needed to meet contractual requirements would have been diverted
into the production of these products rather than cheese, thus maintaining a relatively tight stock situation
and supporting wholesale Cheddar prices.
6
The increase in UK milk production from September onwards eventually saw record monthly volumes
achieved by the end of the milk year. Prices for butter and cream saw the quickest reaction to this,
declining from around September, while mild Cheddar prices did not start to fall until the spring.
Figure 2: UK wholesale prices
*
Source: AHDB/DairyCo.
* No data collected
In response to improved returns from the robust wholesale markets and competition for raw milk supplies
between milk buyers, UK farmgate milk prices began to increase in June 2013. Month-on-month increases
continued from June and eventually reached a peak of 34.55ppl in November – an increase of more
than 4ppl from the start of the milk year. The market conditions also meant that farmgate prices in 2013
displayed less seasonality than in previous years.
GB and Northern Ireland (NI) average farmgate prices tracked closely throughout the 2013/14 milk year,
with the NI price 0.2ppl higher on average over the year; in 2012/13, it was 2.5ppl less than the GB
price. As more of NI’s raw milk is destined for export markets its farmgate price reacts more quickly than
GB prices. Consequently, the decline in world commodity markets at the start of 2014 led to the NI price
in May 2014 being 2ppl lower than in GB. GB farmgate prices remain less volatile due to the influence of
the domestic liquid milk market, which accounts for around 50% of raw milk production.
7
Figure 3: Average farmgate milk prices
Source: Defra, RERAD, DARD, AHDB/DairyCo.
Dairy farm business income
Higher farmgate milk prices and increased production, combined with an easing of cost pressure, led to
higher dairy farm incomes in 2013/14. The provisional Defra average farm business income value shows
a substantial increase over the year for all UK regions with available provisional income figures.
Table 1: Average dairy farm business income
£ per Farm
England
Wales
Scotland
N.Ireland
UK
2009/10
59,000
47,500
80,000
20,000
50,000
2010/11
66,000
57,500
78,000
51,500
56,000
2011/12
86,500
68,000
82,000
58,000
77,500
2012/13
51,500
45,000
45,500
28,000
45,000
2013/14*
101,000
84,500
--
63,000
--
Source: Defra Agriculture in the United Kingdom 2013.
*provisional
Accounting years ending on average in February
Farm Business Income is the preferred measure for comparisons of farm type and represents the return to all unpaid labour (farmers,
spouses and others with an entrepreneurial interest in the farm business) and to all their capital invested in the farm business including
land and farm buildings.
Although production levels in 2013/14 made a significant recovery from the late cold spring of 2013,
input costs at the start of the milk year will have been high for many farmers. This was particularly the case
for feed costs, as turnout was delayed and forage stocks were depleted. However, conditions improved
significantly in the summer of 2013, boosting milk production, while feed costs started to decline.
Consequently, net margins in the latter part of 2013 are likely to have improved the overall average dairy
farm business income for the year.
8
Cheddar markets
Wholesale Cheddar prices rose in 2013/14 following a drop in Cheddar production in 2012/13, which
had left stocks low. While the supply of milk to cheese increased in the second half of 2013 and into
2014, this did not result in an over-supply to the market as manufacturers needed to replenish stocks.
According to Defra, around 36 million litres more milk was utilised for cheese production in 2013/14 than
in the previous milk year. UK cheese production in 2013/14 accounted for 27% of the milk utilised that
year and, consequently, total UK cheese make was up 2.4% in 2013/14 compared to 2012/13. Despite this,
prices maintained their high levels into 2014, as the increased cheese production would have only served to
replenish depleted stocks resulting from the large decline in the cheese make in 2012/13 (Figure 4).
With domestic supplies under pressure, imports increased from the previous year, with the strengthening
Sterling/Euro exchange rate exacerbating this position. Ireland continued to be the main country of origin
for the UK’s Cheddar imports, accounting for 77% of the 114,000 tonnes imported in 2013/14. However,
as a whole, Ireland’s share of UK Cheddar imports declined by two percentage points between 2012/13
and 2013/14, as the number of countries supplying the UK increased. Notably, the United States
increased exports to the UK from negligible quantities to more than 3,000t in 2013/14.
Figure 4: Cheese make v wholesale prices
*
Source: AHDB/DairyCo, Defra.
* No data collected
The lack of available supplies meant mild Cheddar wholesale prices improved by 16% over the course of
2013 and were trading at an average of £3,450/tonne by the end of the year. However, prices started to
come under pressure at the start of 2014 as the production and stock situation improved, with the average
price of mild Cheddar falling by £150/tonne by the end of the 2013/14 milk year.
In a similar fashion to the mild Cheddar market, mature Cheddar prices rose steadily in the first few
months of the milk year. The average UK wholesale price for mature Cheddar reached a high of £3,650/
tonne by September 2013 and has remained firm since. This is due to the continued lack of available
mature Cheddar stocks as the costs involved with manufacturing the product mean little is made outside
of contracted volumes. The 2013/14 milk year started with the premium for mature Cheddar over mild
Cheddar at its lowest level since 2007, but ended the milk year in March, trading at a more typical
premium of £350/tonne.
9
In the retail market, the average price for mild Cheddar fell slightly over the year, by the equivalent
of 0.2ppl. This is in part due to a fall in the average price of private label varieties, which make up
94% of this market. In addition, budget private label mild Cheddar, which is typically priced lower,
increased its market share to 60% in 2013/14, up from 56% in the previous year. Although wholesale
prices increased, this was not reflected in average retail prices as retailers tried to keep prices low in
order to keep sales volumes up and maintain market share in the face of increased competition from the
discounters.
In 2013/14, the average retail price for mature Cheddar increased by the equivalent of 0.3ppl in
comparison to 2012/13. While the average retail price for private label mature Cheddar fell, due to
heightened competition between retailers, this was offset by price increases in the branded category. The
average price for branded mature Cheddar, which makes up around half of this market, rose by 1.9ppl
over the year, in line with wholesale price increases.
10
Mild Cheddar margins
Buoyant wholesale markets for mild Cheddar and competition for milk supplies meant farmgate prices rose
through the year. Despite the resulting increase in raw milk costs, higher wholesale prices for mild Cheddar
have seen processor gross margins remain stable over the year.
A summary of the key events impacting the market for mild Cheddar during the 2013/14 milk year is
provided in Table 2.
Table 2: Key drivers in mild Cheddar markets 2013/14
Price impact
Key drivers
1st
6 mths
2nd
6 mths
Segment
Competition for market share at retail level leads to decline in the
average price of private label mild Cheddar over the year
↓
↓
Retail
Less milk diverted to Cheddar production in 2013 compared to
2012, leading to decreased Cheddar availability
↑
↔
Processor
Robust wholesale markets throughout 2013 as a result of low
supply and strong demand, with prices only declining in early
2014 in response to improved milk production
↑
↔
Farmer
Increased competition between milk buyers for direct suppliers
due to investment into processing facilities
↑
↑
Farmer
Source: AHDB/DairyCo.
Figure 5: Prices and gross margins for mild Cheddar 2000 to 2014
Source: AHDB/DairyCo.
In 2013/14, farmgate prices rose by 15% compared to 2012/13, to an average of 32.6ppl. Despite
this, processor gross margins in percentage terms have been maintained and actually improved slightly on
a pence per litre basis, as wholesale prices rose in line with farmgate prices. The tight supply situation in
mild Cheddar markets over the majority of the year kept wholesale prices at high levels.
11
As these figures are estimations of processor gross margins, they do not account for any additional revenue
or production costs. Therefore, a change in gross margin or the share of retail price does not necessarily
equate to a change in profit levels. Differences exist between businesses both along and at the same stages
of the supply chain in areas such as cost structure and level of production efficiency, which will determine
the relative profitability of a business.
The impact of the time lag between milk purchases and cheese sales on margins must be considered; mild
Cheddar sold in 2014 is likely to have been manufactured using costly milk, yet wholesale prices have
eased compared to those at the latter end of 2013.
It is also important to note that the processor gross margins listed here do not include any additional
income from Cheddar by-products such as whey powder. Average whey powder prices in 2013/14 were
10% higher than in 2012/13, which may have generated opportunities for increased revenue.
Table 3: Comparison of mild Cheddar gross margins (Defra farmgate)
2003/04
ppl
Milk price
2012/13
margin
18.3
Processor
gross margin
3.3
Processor
selling price
21.7
Retail gross
margin
12.5
Retail price
34.1
ppl
2013/04
margin
28.4
15%
2.6
29.7
60.7
margin
32.6
9%
31.1
37%
ppl
3.1
9%
35.7
49%
24.8
41%
60.5
Source: AHDB/DairyCo.
Note: Retail prices may differ from previous reports due to reweighting of retail prices from Kantar Worldpanel.
The increased wholesale prices over the year appear to have had a greater effect on retail gross margins
than processor gross margins, as it declined by eight percentage points over the year. In general, retail
prices for mild Cheddar have been rising steadily since 2008, however, 2013/14 saw a slight decline in
the average retail price. Retail prices continue to be influenced by retail competition, particularly with the
growing influence of the discounters such as Aldi and Lidl. Lower priced varieties of mild Cheddar took
up a larger share of the market than in 2012/13, as the major retailers move to provide a value offer to
consumers in light of increased consumer budgeting and competition from the discounters.
Retailers are now seeing their gross margins fall in a similar way to 2007/08, when wholesale Cheddar
prices rose sharply due to declining milk production at a time when economic conditions were poor.
The milk price used in Table 3 is the Defra average price and reflects prices paid on all milk contracts,
regardless of end use. As a premium is typically paid on liquid contracts, particularly those that are
retailer-aligned, DairyCo compensates for this by calculating the ‘typical’ farmgate price for raw milk
bought specifically for cheese production. This is done using information from cheese contracts collected
for the monthly DairyCo league table and is based on the DairyCo standard litre3.
3
See http://www.dairyco.org.uk/market-information/milk-prices-contracts/milk-calculator-and-contracts/league-tables/#Standard%20Litre%20-%202012/13
12
Table 4 summarises mild Cheddar gross margins using an average farmgate price paid for milk for cheese
contracts – ie raw milk which is contracted and priced specifically for cheese production. It shows margins
over the past two years, with a comparison to gross margins five years ago.
Table 4: Comparison of mild Cheddar gross margins (Milk for cheese contracts)
2009/10
ppl
Milk price
2012/13
margin
22.8
Processor
gross margin
4.2
Processor
selling price
27.0
Retail gross
margin
28.8
Retail price
55.8
ppl
2013/14
margin
27.9
16%
3.2
29.7
60.7
margin
31.4
10%
31.1
52%
ppl
4.3
12%
35.7
49%
24.8
41%
60.5
Source: AHDB/DairyCo.
Note: Retail prices may differ from previous reports due to reweighting of retail prices from Kantar Worldpanel.
Standard litre data was not available by contract type until 2005. As such, there is no comparable data for the 2003/04 milk year.
While Table 4 provides figures based on cheese contracts only, the changes in gross margins are similar to
that observed when considering the average Defra farmgate price.
13
Mature Cheddar margins
Wholesale prices for mature Cheddar were largely static in 2013/14, having peaked in September 2013.
This, combined with slightly lower average retail prices as a result of retail competition, has resulted in a
decline in retailer gross margins.
A summary of the key events impacting the market for mature Cheddar during the 2013/14 milk year is
provided in Table 5.
Table 5: Key drivers in mature Cheddar markets 2013/14
Price impact
Key drivers
First
6 months
Second
6 months
Segment
Average price of mature private label Cheddar decreases
between 2012/13 and 2013/14 due to increased competition
for market share at retail level
↓
↓
Retail
Less milk diverted to Cheddar production in 2013 compared to
2012, leading to decreased Cheddar availability
↑
↔
Processor
Robust UK wholesale markets throughout 2013/14 as stocks
remain tight as a result of reduced production in 2012/13
↑
↔
Farmer
Increased competition between milk buyers for raw milk supplies
due to investment into processing facilities
↑
↑
Farmer
Source: AHDB/DairyCo.
Figure 6: Prices and gross margins for mature Cheddar 2000 to 2014
Source: AHDB/DairyCo.
Mature Cheddar processor gross margins have fallen slightly over the year as farmgate prices rose and
wholesale prices, though higher than the previous year, did not fully compensate for the resultant increase
in the cost of milk. With this decline, the processor gross margin for mature Cheddar is now just five
percentage points higher than that of mild Cheddar, compared to twelve percentage points five years ago.
14
The wholesale price for mature Cheddar rose by the equivalent of 3.7ppl in 2013/14, while farmgate
prices rose by 4.2ppl from the previous year. This slight difference resulted in the average processor gross
margin being two percentage points lower than in 2012/13.
There are increased costs associated with the production of mature Cheddar, due to the longer maturation
period compared to mild Cheddar. These additional costs mean manufacturers tend to make this product to
contract. As a result, there is less mature Cheddar traded on spot markets compared to mild Cheddar and
prices are more stable.
In addition to this, the increased maturation time means there is greater potential for changes in farmgate
and wholesale prices to impact processor margins. Mature Cheddar sold in the second half of 2013 is
likely to have achieved a better margin than that sold in 2014, as farmgate prices in 2012/13 were lower
than in 2013/14, while wholesale prices were high.
As with mild Cheddar, processor gross margins listed here do not include any additional income from
Cheddar by-products such as whey powder.
Table 6: Comparison of mature Cheddar gross margins (Defra farmgate)
2003/04
ppl
Milk price
2012/13
margin
18.3
Processor
gross margin
4.7
Processor
selling price
23.1
Retail gross
margin
31.9
Retail price
55.0
ppl
2013/14
margin
28.4
21%
5.6
16%
34.0
58%
31.5
65.6
ppl
margin
32.6
5.3
14%
37.7
48%
27.1
42%
64.8
Source: AHDB/DairyCo.
Note: Retail prices may differ from previous reports due to reweighting of retail prices from Kantar Worldpanel.
Retail gross margins in the mature market are down by six percentage points from 2012/13, having fallen
in a similar way to those of mild Cheddar. This is due to a slight decline in the average price of private
label mature Cheddar, which decreased by the equivalent of 0.8ppl, while wholesale prices rose. The
market share by volume belonging to private label mature Cheddar has increased over recent years and
now makes up 50% of this market. This is still far less than for mild Cheddar, where private label varieties
account for 94% of volumes.
The average retail price for mature Cheddar fell by more than that of mild Cheddar, as the retail price for
mature Cheddar did not start to climb until the end of the milk year.
15
Table 7 shows the gross margins for mature Cheddar when using the average farmgate price paid for
milk on cheese contracts. It illustrates the effect of the lower average price on estimated processor gross
margins, with a comparison to margins in the previous milk year, as well as five years ago.
Table 7: Comparison of mature Cheddar gross margins (Milk for cheese contracts)
2003/04
ppl
Milk price
2012/13
margin
22.8
Processor
gross margin
8.6
Processor
selling price
31.4
Retail gross
margin
33.6
Retail price
65.0
ppl
2013/14
margin
27.9
27%
6.1
31.5
65.6
margin
31.4
18%
34.0
52%
ppl
6.5
17%
37.7
48%
27.1
42%
64.8
Source: AHDB/DairyCo.
Note: Retail prices may differ from previous reports due to reweighting of retail prices from Kantar Worldpanel.
Standard litre data was not available by contract type until 2005. As such, there is no comparable data for the 2003/04 milk year.
While processor gross margins increased slightly in pence per litre terms when considering milk for cheese
contracts, a decline in the gross margins in percentage terms was still observed. However, this decline is
less pronounced on these contracts due to the farmgate price being lower than the Defra average.
16
Conclusion
In line with global markets, the UK dairy industry saw sustained high wholesale prices for dairy
commodities in 2013/14. The Cheddar markets climbed to record highs on the back of difficult production
conditions in the previous milk year, which led to the depletion of stocks. Farmgate milk prices continued
to be led by events in world commodity markets over the year. In addition to this, competition for raw milk
supplies provided further support to farmgate prices, as processors looked to retain or build their milk
pools in line with company growth plans.
Processor gross margins have been maintained in the mild Cheddar market as wholesale prices rose in
line with farmgate prices. For mature Cheddar, processor gross margins declined slightly as, although
the wholesale price for mature Cheddar was higher in 2013/14, the increase was not enough to fully
compensate for the change in farmgate milk prices. The impact of the time lag between milk purchases
and cheese sales on margins must also be considered; mild Cheddar sold in 2014 is likely to have been
manufactured using costly milk, yet wholesale prices have eased.
Retailer gross margins in the Cheddar market are historically strong and remain so despite a fall in the
average retail gross margin between 2012/13 and 2013/14. Downward pressure on retail prices was
the result of price competition arising from the growth of the discounters, with an increasing number of
consumers choosing the discounters for their main shop. Because of this, retailers were less able to pass
on increasing wholesale costs to consumers. Predictions of further growth in the discounters’ market share
imply that price competition at retail level will continue at least in the short-term, adding further downward
pressure to retailer gross margins.
At the moment, the retailers appear to be absorbing the effect of new low pricing strategies arising in
response to retail competition. However, if this continues and the wholesale markets rebalance to lower
levels, it could start to negatively impact on processor gross margins.
17
Appendix
Data Sources
The following is a list of the data used in this report, the source of the data and its characteristics.
Farmgate milk prices
Farmgate milk prices are provided by Defra on a monthly basis and represent average prices received
by farmers, net of delivery charges and excluding any retrospective bonuses. The prices are obtained by
Defra from a monthly survey of registered milk purchasers in England and Wales, which records volume,
value and protein content of milk purchased from farms in England and Wales. All major milk purchasers
(those purchasing over 2 million litres of milk per year) take part in the survey and approximately 90% of
milk purchased from UK farms is accounted for.
The Defra published prices are weighted according to the volume of milk purchased and averages are,
therefore, influenced by the larger milk purchasers. For the supply chain analysis, annual average farmgate
prices are not weighted but are simple averages of the twelve months of data.
Milk for cheese contract prices
For comparison purposes, a typical price paid for milk for cheese was calculated using the DairyCo
standard litre milk prices for a basket of cheese contracts included in the DairyCo league table. These
include the Dairy Crest Davidstow contract, First Milk’s compositional and Highlands & Islands contracts,
Arla’s manufacturing contract, and Joseph Heler’s and Wyke Farms’ contracts.
Wholesale prices
UK wholesale prices for cheese, butter, powders and cream are collected monthly by DairyCo by
obtaining quotations from traders and milk processors and indicative prices are published at
dairyco.org.uk/market-information/milk-prices-contracts/wholesale-prices/uk-wholesale-prices/
For the supply chain analysis, annual averages are a simple average.
For mild and mature Cheddar, prices collected are based on spot prices and relate to larger quantities of
a container or more on a delivered price basis per tonne. These figures are then converted by DairyCo
to a pence per litre (ppl) equivalent using a conversion factor of 9.4 litres/1kg cheese. This conversion
factor has been used for all previous dairy supply chain reports and has been maintained for this report
for historical comparisons. Following a review of the market indicator MCVE (Milk for Cheese Value
Equivalent) in 2014, a revised conversion factor of 9.3 litres/1kg cheese has been used since April 2014
and therefore future reports will use this conversion.
Retail prices
Retail prices for Cheddar cheese are obtained from Kantar Worldpanel, which collects survey data from
30,000 consumers in GB on the volume and value of purchases. Annual average prices for both mild and
mature private label Cheddar were calculated using 4-weekly data on expenditure and volume of retail
sales. As units sold at retail level are recorded in kilograms, DairyCo converts these to a pence per litre
(ppl) basis using the same conversion factor as for wholesale prices.
18
Agriculture and Horticulture Development Board
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T: 024 7647 8695
E: [email protected]
W: dairyco.org.uk
DairyCo is a division of the Agriculture and Horticulture Development Board