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Robert Wiseman: A modern milkman with a lot of bottle

Location, location, location is the key to the dairy business, the Robert Wiseman chairman tells Sarah Arnott

"It feels like a war of attrition at the moment," says Robert Wiseman, the chairman of the eponymous dairy group set up by his father – also Robert – more than five decades ago in Glasgow.

We meet at the company's Bridgwater facility in Somerset. With the final phase of the £100m scheme completed in November, the factory can now process a staggering 500 million litres of milk every year.

It is an impressively industrial place. Robert Wiseman is not the kind of dairy company that has its own herds. The nearest thing to an actual cow at Bridgwater is the distinctive black-and-white Friesian pattern on the endless lorries to-ing and fro-ing in the loading bays. In fact, the only sign of the product at all is the faintest tang of dairy in the air. The plant is a network of gleaming tubes, vast machines and fast-moving conveyor belts, processing around 10 per cent of Britain's daily milk consumption and about 9 million litres every week.

By a coincidence of lead times, Bridgwater is at full whack just as the dairy industry is facing more than usually straitened times. The pressures in the food industry are always the same, with supermarket customers on one side fighting to keep their prices down, and volatile global commodity markets threatening a spike in costs on the other. The difference at the moment is in intensity.

Steadily rising oil prices – sent to more than $100 this month by the political crisis in Egypt – are a double hit for Robert Wiseman, the 1,500-strong truck fleet and plastic bottle requirements adding £8m on to the company's costs with every $10 rise in the global price. Meanwhile, two of the biggest supermarkets, Asda and Tesco, have committed to permanently lower milk prices, with the rest expected to follow. And soaring farm-gate prices have seen both Robert Wiseman and rival Dairy Crest increase their payments to farmers from the start of next month.

"It is particularly ferocious at the moment," Mr Wiseman admits in a broad Glaswegian accent. "There are 60 million people in this country, and they are all looking at what they are spending their money on."

Robert Wiseman dairies is already feeling it. Since floating on the Stock Exchange in 1994, massive expansion plans have seen the company's market share rocket from 2 per cent to 32 per cent, with financial results to match. But last September, the group warned that this year's profits will be down by £7m, and next year's by £16m, wiping nearly a third off the share price in a single day.

"It's disappointing to see profits fall, of course," Mr Wiseman says. "As consumers find things tougher, our big retail customers try to buy better, and as they fight for share of a very competitive industry we are caught in the backlash."

But the dairyman is far from gloomy. "We've got to get in there and compete," he says, with genuine relish. "We're still making money, we're very efficient, we've got a committed workforce, and we really are quite good at what we do."

There are some tough decisions to be made. As part of an organisation-wide efficiency plan, some 3,000 projects, from mobile phone contracts to fleet procurement, are under the microscope. And two of the company's smaller facilities – one dairy and one depot – are under consultation with a view to possible closure.

"When you come under pressure then you sit at the board meeting and say there are no sacred cows," Mr Wiseman says. "No decisions have been made yet but we've got to look at these things."

When the company listed in 1994, the family used the £14m raised to pay off their mortgages and set about turning the local doorstep-focused milk company into a national titan supplying shops. The first stop was Manchester – "because our drivers could get there and back in a single shift" – then Leeds, then south again to Wolverhampton and Droitwich.

Now, 17 years later, Robert Wiseman has seven dairies and 14 distribution depots, from Aberdeen to Pensilva, in Cornwall, all carefully located along a spine running between the milk-producing lands of the west and the motorways connecting them to the rest of the country.

It was a canny move, establishing the most modern dairy network in Britain. And at £480m in capex, it has not been cheap. But the Wisemans used profits and capital raisings to fund the expansion, leaving the company in good shape now, even with the recent profits warnings. While rivals are feeling the pinch from vast debts, yawning pension deficits, and outdated facilities dating from the monopolistic days of the Milk Marketing Board, Robert Wiseman has modest debts, an obsession with efficiency, and Bridgwater.

The new dairy is not just big. It is also green and highly efficient, part of the company's five-year programme to its environmental impact on measures covering everything from fuel consumption to landfill waste to bottle design.

The biggest innovation at Bridgwater is the on-site effluent treatment plant that cuts water usage by 200,000 litres every day – a scheme with potential to be rolled out in the group's other facilities if it proves effective.

This is no marketing gimmick, this is pure business, Mr Wiseman stresses. "The environmental targets are not some fluffy bunny idea," he says, almost angrily, pointing out an empty acre of land behind the Bridgwater boiler house which would have had a biomass electricity station on it, only the company could not make the economics add up.

"If we get it right then it will pay us, but the payback has to be there," Mr Wiseman says. "Environmentalism will only work if it is good for shareholders."

Alongside the issue of running costs, turnaround time is vital. The milk goes from cow to factory in less than 24 hours and will be pasteurised, separated, bottled and shipped within another 48. Mr Wiseman likes to describe the company as a logistics business that happens to deal in fresh milk. In such trying times, such a focus on efficiency, and modern facilities like Bridgwater, are a central competitive advantage, he says.

"Operators with old dairies are less efficient, they are built the wrong way and in the wrong places," Mr Wiseman says. "The industry has got to go forward, it's survival of the fittest, and we're in a great position."

Milking it

* Since 2002, Robert Wiseman has been chief executive and then chairman of Robert Wiseman Dairies, set up by his father in 1947.

* Mr Wiseman started with a milk round at the age of 11.

* He joined the business under the auspices of brother Alan in 1975, after studying at agricultural college.

* He now commutes to Britain every week from Marbella, in Spain, where he lives with his wife and the youngest three of his seven children.

* If he had not gone into the family milk business, he would have been a chef, and he cooks Sunday dinner for his family every weekend.

* On petrol prices: "If the Government can do anything to reduce my fuel bill I'd be delighted."

* On debt: "We were criticised on the stock market for years about building our balance sheet, but I just think that you shouldn't spend what you don't have. I'm not averse to a gamble – investing £480m in the dairy business is a hell of a gamble – but I've got to shave myself in the morning and not cut my throat."