Dairy Crest in £33m doorstep milk deal

Dairy Crest is buying Arla Foods' Express Dairies for £33m to become Britain's biggest milk-delivery service with 2 million customers in an attempt to fight back against the supermarkets.

Dairy Crest, the maker of Clover spread and Cathedral City cheddar, said the acquisition would catapult its doorstep market share from 33 per cent to 49 per cent. It also delivers to retailers, schools, hospitals and restaurants - where its market share moves from 14 per cent to 18 per cent.

Drummond Hall, the chief executive, said: "We will be able to prolong the life of these businesses by putting them together," adding he was keen on further acquisitions.

He compared the Express deal to last year's £24m acquisition of Midlands Co-op, where he boosted milk delivery from 330 gallons a week to 450 gallons.

Express Dairies currently delivers 690 million pints of milk a year with 77 depots and two dairies in Liverpool and Nottingham. Dairy Crest expects to make savings of £9m by 2008-09 from combining the two milk-delivery businesses. Mr Hall said job losses would amount to less than 5 per cent of the combined 6,000-strong workforce.

The milkman has long been losing ground to the supermarkets, where milk is cheaper. Tim Smith, Arla's chief executive, said that the most Dairy Crest could hope for was to stem the 8-9 per cent annual decline in its milk-delivery business. He said the sector's share of the milk market had shrunk from 25 per cent in 2000 to 11 per cent.

"In order for this sector to have a viable future, further consolidation of the industry was required," he said.

Arla will concentrate on its Cravendale, Lurpak and Anchor brands.