Farmer-owned dairy co-operative First Milk is to cut up to 70 jobs and conduct a governance review following its recent disappointing performance.
Over the past nine months, the company said, falling commodity prices have ‘highlighted strategic and operational issues that must be addressed’.
Since his appointment in April, First Milk’s new chief executive Mike Gallacher has been working with the co-op’s board and executive teams on a turnaround plan aimed at providing a better return to farmer members.
The aim is to offer service and value to customers while increasing efficiency, with a relentless focus on core operations.
A programme of cost reductions includes proposals for up to 70 redundancies, which were announced to employees on 1 May and are now the subject of a consultation.
A ‘small number’ will be at manufacturing sites and ‘up to 50%’ within the company’s head office and support teams.
The business will be refocused on core UK dairy contracts and customers and a new approach to milk pricing will link local milk prices to the value generated.
From 1 June, pricing will be based on net commercial returns from First Milk’s manufacturing sites and customers.
The tightest and closest milk fields will be used to service those outlets.
A £3.3m reduction in member payments has been built into milk prices, equating to an average price reduction of 0.33ppl.
The First Milk board has confirmed the B price for April at 16.1ppl and based on its projections the B price range for June will be 14-17ppl.
An independent review of the governance and commercial learnings from the business’s recent disappointing performance will be modelled on the recent Lord Myners review of the Co-operative Group. It will seek to identify clear recommendations by summer 2015.
The changes follow the appointment of three externally recruited senior executives to First Milk’s management team. The company will soon appoint a new senior non-executive director to the main board, replacing Bob Stott who stepped down at the end of 2014.
Mike Gallacher explained the plan to members at meetings during the first two weeks of May.
He said: “None of the decisions have been taken lightly, but they are necessary steps in the process of rebuilding a secure and stable future for First Milk, its members and its employees.
“As a team, our aim will be to provide every support for those impacted in the coming months.”