Whisky and milk price rises could sour 'feel-good' factor

NICOLE VEASH

Forthcoming price rises for a pint of milk and a bottle of Scotch whisky may damage government hopes for a return of the "feel-good" factor.

Milk sold in supermarkets and corner shops will cost an extra 3p a pint, up 10 per cent, while whisky will go up at least 27p a bottle, an average 4 per cent rise, as early as next week.

The increases, which are above the rate of inflation, are a result of rising costs of packaging and raw material.

Since the Milk Marketing Board was abolished 15 months ago, milk processors, who obtain supplies from producers, say the cost of the raw material has increased by about 10 per cent, added to another 10 per cent rise in packaging costs.

Unigate and Northern Foods, owners of Express Dairies, are asking for big price rises from retailers to cover their damaged profit margins.

Negotiations between the milk processors and the supermarkets are advanced, and industry experts predict an increase soon.

A spokesman for Asda said: "We can confirm that some processors are negotiating for an increase. It is too early to say if our prices will rise."

The new price of a bottle of whisky, a result of higher packaging and paper costs, is likely to hit the shops in the next few days. The move will wipe out Chancellor Kenneth Clarke's reduced duty on spirits introduced in the last Budget.

Brian Ivory, chief executive of Highland Distilleries, said: "A bottle of our leading brand, Famous Grouse, will cost pounds 12.99 instead of pounds 12 from next week."

City analysts expect shares in the big drinks companies, including Guinness and Grand Metropolitan, as well as Unigate and Northern Foods to rise in the hope of improved profits.