Scotland business

Morrisons supermarket denies milk 'profiteering'

Cows
Image caption Some farmers have complained the price they are paid for milk is now less than their production costs

A supermarket executive has denied "profiteering" from the falling cost of milk and said suppliers set the price.

Morrisons agriculture manager Andrew Loftus told MSPs on the rural affairs committee his stores were actually seeing a drop in profits.

Last month, the committee launched an urgent inquiry into the milk pricing crisis.

Some farmers have complained the price they are paid for milk is now less than their production costs.

A two-litre carton of milk is now £1 in many supermarkets.

Dairy co-operative First Milk last month announced it was to delay paying milk producers for two weeks due to financial difficulties.

The committee also heard evidence from Asda's business director. Representatives from other chains will appear before MSPs on Thursday.

MSPs were told both Asda and Morrisons are supplied by dairy co-operative Arla Foods UK, which currently pays farmers 24.87p for a standard litre of milk.

Chris Brown, Asda's sustainable business director, said: "I would like to emphasise that that's the price that Arla pay and Arla decide."

'Making less'

Mr Loftus added: "We negotiate a price with those companies for pasteurised, standardised bottled milk delivered to our depots around the country and it's up to them to set the price, the farm gate price, that the farmer receives."

When asked about the profit margins on Morrisons milk, Mr Loftus said he had looked at the gross margins they are able to achieve.

He said: "I can categorically assure this committee they are slightly under the average gross margins for Morrisons retail as a group.

"So the question of us profiteering or making more - the trend is downwards, we're making less than we were."

Image copyright Thinkstock
Image caption A two-litre carton of milk is £1 in some supermarkets

Michael Russell, MSP for Argyll and Bute, pressed the supermarkets to accept they had an influence on the price paid by suppliers for milk.

He said: "Both of you have said it's the processor's price, not the price you set. But the reality is...if the processor was setting a price that you didn't want to pay, you would by the normal contractual process, choose another processor."

But Mr Loftus said the price of milk was not the main focus in Morrisons' tendering process.

He said: "We awarded our liquid milk contract on the basis of processing and distribution costs almost entirely, those are the key things for us."

The committee had threatened to "empty chair" Tesco, Sainsbury's, Marks and Spencer and Lidl if the supermarkets refused to come to Holyrood to answer questions on the issue.

Convener Rob Gibson wrote to the four chief executives advising the committee could also force senior figures to attend.

All have now agreed to give evidence, alongside representatives from Aldi, Waitrose and Co-Operative Food on Thursday.

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