Sainsbury's introducing a Cost of Production model to reward its dairy farmers for outstanding animal welfare, environmental standards that will ensure long-term sustainability of milk

Cindy Allen

LONDON , April 20, 2012 (press release) – Unique model ensures long term sustainability of milk
Farmers rewarded for animal welfare and environmental excellence
Developed with independent consultants to suit all farms
Overwhelming majority of dairy farmers vote in favour

Sainsbury's will be introducing a unique Cost of Production (COP) model from 1 May 2012, designed to reward Sainsbury's Dairy Development Group (SDDG) farmers for outstanding animal welfare and environmental standards. Following an overwhelming majority vote the farmers will benefit from the most robust and transparent model available which forms part of Sainsbury's ground-breaking 20 by 20 Sustainability Plan.

The model has been developed with independent consultants to suit all Sainsbury's farm types and sizes and ensure their sustainability and profitability in the long term. One of the unique elements of the COP is the quarterly review of feed, fuel and fertiliser. This will ensure that the most volatile elements of costs will be reviewed every quarter and the COP milk price will change to reflect these varying costs, in turn ensuring a fair deal for the 324 farmers involved.

From 1 May the COP price will be set at 30.30 ppl (for a standard 1 million litre producer) including a welfare and environment bonus payment. The bonus is designed to reward farmers for excellence in animal welfare and their continued commitment to reducing the environmental impact since the Sainsbury's Dairy Development Group was established five years ago.

Justin King, Sainsbury's CEO said: "This is great news for farmers and testimony to the incredibly close relationships we've built over the past five years through our industry-leading Dairy Development Group. We've invested £40 million and seen significant advances in animal welfare and environmental standards, in turn saving our dairy farmers over £10m.

"We're delighted farmers have voted to adopt our model. It's a real vote of confidence in our approach and will help farmers at a time when costs for producing milk are so volatile.

"This is also good news for customers who want retailers to do the right thing on their behalf. This move is a great example of how our values make us different. It is a natural next step towards our wider commitment to source with integrity, including our pledge to source all key raw materials sustainably by 2020, and to double the amount of British food we sell."

Ben Jack, SDDG Steering Group representative said: "This confirms Sainsbury's huge commitment to its liquid milk suppliers and will enable the SSDG to move forward and promote the terrific work that has already been achieved."

By 2020, Sainsbury's will source all key raw materials and commodities sustainably to an independent standard. The plan also includes doubling our British sales, being number 1 for animal welfare and putting all waste to positive use.
Sainsbury's has supported British farming for 140 years and we continue to work collaboratively for the best solutions on price, animal welfare and carbon efficiencies. This year marks the 5th anniversary of Sainsbury's Dairy Development Group. Sainsbury's now also has farmer Development Groups across pork, beef, lamb, cheese and wheat.
The model will be introduced across farmers of Wales, England, Scotland. Any farmers who are against the move to a COP model now have the option of leaving the SDDG provided it is before the 1st May.

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