The UK's leading organic retailer, Tesco, today announced plans to cut the price customers pay for organic milk in a move designed to increase sales and reduce the surplus that has dogged the industry for many months. The plan is a significant step towards reaching Tesco's target to grow sales of organic food to £1 billion by 2005.

The price cut is possible thanks to an exclusive venture between Tesco and (the Danish Company) Arla Foods, which will see all Tesco organic milk produced on one site. The savings from this consolidation will be invested in the retail price reducing it by up to 6p per pint as the market grows.

Announcing the deal Tesco Commercial Director, John Gildersleeve said:

"Last year we announced a bold target to grow our organic market to £1 billion by 2005. This followed in depth customer research which showed that customers want to buy more organic food but that issues around availability and affordability prevented many of them doing so. We have listened to customers and acted on their concerns by growing our range of products to around 1100 and reducing prices on many lines.

"All Tesco milk is British and by moving production to one site we have made real cost savings which we can now invest in lowering our retail price. The effect will be to make organic milk more affordable for many more customers and experience tells us that this will grow sales significantly.

"This should be a win-win - increasing sales of organic milk will help British dairy farmers and more progress towards our target of £1 billion of organic food and drink sales over the next 5 years.

Philip Wilkinson, Commercial Director of Arla Foods plc, said: "To maximise the organic food and farming sector's potential longer term, we need to encourage more mainstream consumers to regularly put organic products on their shopping list. These shoppers are key to the next stage of the sector's development and where its continued growth and popularity will come from. The processing of organic milk at one site brings supply chain efficiencies that will benefit the consumer and encourage further growth.


Notes for Editors:

1. Tesco announced a target to grow its organic market to £1 billion in November last year. This followed customer research that showed people from all backgrounds wanted to buy more organics. Responding to concerns over availability and affordability highlighted in this research we also cut prices on 50 of the most popular lines and increased the range to over 1100 products.

2. Organic sales at Tesco are currently worth around £235 million per year.

3. Tesco recently announced the repatriation of £12 million of organic supplies back to the UK. Examples of organic produce now 100% UK sourced include fresh organic lamb worth £1.1 million, organic eggs worth £5 million and organic carrots and parsnips worth around £6 million. Fresh organic chicken, butter and cheese will be 100% UK sourced by spring this year.

4. For further information please contact Jonathan Church on 01992 644645. For out of hours pager service please call Security Office on 01992 644733 and select option 5 from the voicemail.

We have just had a price cut of 2p a litre in our ex farm non-organic milk, putting our milk price back down to the lowest level in real terms for over 70 years. I hear that the organic milk price is being squeezed as well. However, Tesco are announcing here that they are to reduce the retail price of organic milk by 6p a pint (that is 10.55p per litre!). Tesco must have been ripping off their customers if they can afford to reduce the price by that much!

This price cut of 2p a litre will take £20,000 off my farm profit of £4,000! There is no way I can absorb the loss and it looks like many more of us will have to throw in the towel very soon. The FFA were recently assured by Tesco that they would not put pressure on dairies to supply them with cheaper milk so what is causing the downward pressure despite the shortage of UK produced milk over the last 12 months AND despite increases in EU export refunds for 3 months on the trot?

1. High cost of manufacturing milk into dairy products by inefficient dairies. 4.5p a litre when a new factory says it can do it for less than 2.0p a litre

2. Cheap imports - it is cheaper to import from 3rd world and Central eastern European countries than it is to bother to start up the factory.

3. The strong pound (sorry the weak Euro because the pound is only $1.41 now when it was $1.60 a couple of years ago). A strong pound means cheap imports even from France and Germany.

4. Lower subsidies because they are paid in defunct Euros.

The result is that our highly lucrative market has been overrun with cheap imports and it is harming our domestic industry. If we were American farmers, Bush would implement a levy on imports, which are allowed under WTO rules for up to 2 years I think. So why doesn't the UK Government bring in levies on imports? It cannot because it does not have the Sovereignty to do so! Such a decision would have to be an EU decision and 13 out of the 14 countries are laughing because they can supply our market at the expense of the British producers and they are being subsidised to do it with British and German money!! (because it is only Britain and Germany that are paying in more than they are taking out - Germany £9.3bn more but I cannot find out how much Britain is being ripped of by - Greg says £1.8m per hour which would be £15.76bn a year). If true, think what our government could do with £15.76bn a year to pay off debts or improve our hospitals, schools etc - AND carry on supporting our farmers the mere £3bn.

We must ALL keep asking questions about the cost of being a member of the EU!!