Dairy Crest has lost a third of its fresh milk contract with Morrisons to rival milk producer Arla after signing a new three-year deal with the supermarket chain.
The company, which also owns Cathedral City cheese and Country Life butter, is in the process of selling its liquid milk business to Muller UK & Ireland as it shifts its focus to cheese and spreads.
As a result, analysts said losing the volume will be irrelevant in terms of future profit, although it could affect the terms of the deal with Muller. Dairy Crest does not expect the cut to its contract, which comes into effect in March, to materially affect its financial results for the year to 31 March 2015.
Peel Hunt analysts said the lost business equalled about 70m litres, or 10 per cent, of Dairy Crest’s supply to retailers.
It will continue to supply Morrisons with other dairy products including cheese and butter.
The supermarket also said that Graham’s of Scotland will now start supplying its stores in Scotland.