Graham's Dairies downgrades Nairn plant to distribution unit

(UPDATES - please see contrasting 'good news' story near end, plus a further later report about Graham's itself)

I wish I could write that the announcement that Graham's Dairies, based in Bridge of Allan in Perthshire, is to downgrade its Nairn dairy processing unit to a distribution centre only is any kind of surprise to me. Unfortunately it is not. In any case it is projected that 13 employees at Nairn will lose their jobs, reducing staffing levels there to 42.

As I wrote here in January of this year, its profits had been badly-dented in 2011 as a result of pressure on margins with the acquisition of new contracts to supply supermarkets - I described it then as perhaps a classic case of seeking growth in turnover by over-trading. Later in January I became aware that Glasgow-based Robert Wiseman Dairies had been acquired by Muller following its own poor economic results and simultaneously learned that Muller had cut the price it paid for milk from some suppliers.

The latest news about Graham's Dairies plans for its Nairn unit (until Setpember 2010 known as Claymore Dairies until its acquisition by Graham's Dairies) is not, I fear, the last we will hear of it. Supermarkets which are competing with each other to gain market share try to protect their own margins by squeezing their own suppliers, such as Muller and Graham's Dairies, and they in turn try to squeeze those further down the supply chain, in this case dairy farmers. As we now learn is already happening, from the first link above, the farmers supplying the Nairn unit are believed already to be receiving less in payment for their milk than those farmers who supply direct to the Bridge of Allan unit and it remains to be seen how the increased transport costs of trucking the raw milk to Bridge of Allan and back again to Nairn for distribution in the North as processed items will be factored into the costings - who will pay, in other words. I hope the optimistic projections from Graham's Dairies that innovation, marketing, new products and new contracts will not only increase sales, but allow it to maintain or improve its margins and thereby allow it to remain a viable concern.

1st UPDATE (Friday 11MAY2012 11.40 CET) I've just come across another item of business news in the Nairn area which is very happily a positive one - Asher's, the Nairn-based bakery business is to open a shop in Grantown-on-Spey, creating 5 jobs which will probably be part-time. According to company Director Ali Asher, its already-existing outlet in Aviemore (operating since 1998) means it already sends its distribution trucks to the area so supplying the new shop will be straightforward. It is expected the new shop will open toward the end of June, once the premises have been re-fitted and the new employees there will increase the company's workforce to 125.

2nd UPDATE (Saturday 2NOV2013 12.03 GMT) I posted a further article about Graham's on 31st October 2013, this time with much better news - please click here to go there now.

Graham's Dairies profits plummet

(Please see UPDATES at end)

I've just come across this report in the Herald about the recent dramatic fall in pre-tax profits at Graham's Dairies, down 42.5 per cent, whereas turnover rose a significant 20 per cent.

This is usually a sign of over-trading, gaining turnover at the expense of margins. Graham's supplies dairy products to supermarket chains Asda, Sainsbury, Waitrose and Tesco and recently won new business from Morrisons; all have been conducting a 'price war' to gain/retain market share in the current difficult economic climate (and of course it was announced only a couple of weeks ago that Tesco has had very poor trading conditions over Christmas, resulting in a significant fall in share value for the company with renewed profit warnings for the upcoming Easter trading period).

Graham's describes itself as the 'largest independent dairy' group in Scotland. I last wrote about the Bridge of Allan-based company in September 2010 when it was announced it was acquiring Claymore Dairies, at that time the largest employer in Nairn.

All this is unfortunately a graphic illustration of the general malaise that the country, the EU and the wider world is experiencing just now and quite probably for some time to come - as I have written here before "hold on to your hats, folks", expect things to get worse before there is even the glimmer of a prospect of them getting better (for those who remain standing).

UPDATE (Friday 27JAN2012 13.50 GMT) I had not realised that Graham's Dairies was not the only dairy company in the news. The Glasgow-based Robert Wiseman Dairies agreed a couple of weeks ago to be acquired by the German Muller in a cash deal valued at GBP 279.5 million; the company announced 16JAN2012 that more than half the shareholders have agreed; although they have not yet officially voted, it is regarded as a 'done deal'. The company produces about 30 per cent of the fresh milk consumed in the UK. For an insight into how a 'savvy' investor analysed prospects at Wiseman to his advantage click here. Like Graham's, Wiseman recently reported a major drop in profits and the further concentration in production is already worrying some farmers as Muller have apparently in recent weeks cut the price they pay for milk by 0.5p to 29.8p a litre, presumably a way of increasing their own margins (by use of their significant buying power) at the expense of producers who are faced with unavoidably increasing input costs.

2nd UPDATE (Friday 11MAY2012 10.30 CET) Graham's Dairies downgrades Nairn plant to distribution unit - I've written about this latest development here.

3rd UPDATE (Monday 26NOV2013 20.25 GMT) I posted an article entitled "Graham's to 'continue development of value added products at its Nairn facility' " on 31OCT2013 - to read this article click here.