Aldi think of multi-year supply contracts for liquid milk

Date: 02.07.2021Source: VMB


Aldi’s recent postponement of negotiating new supply contracts with German dairies by two months means that the start of the contracts is mostly now in July with a term until the end of the year. This will deprive a large part of the dairy farmers income, with dramatically rising costs. And now there are new and exclusive thoughts from Aldi’s international purchasing centre in Salzburg on future contract periods especially for drinking milk. Dairy farmers should be warned.


According to reports, the contracts between dairies and food retailers for öiquid milk are to be changed to multi-year contracts as of next year. Until 2008, one-year contracts were the rule in the “white line” range, which includes liquid milk. Then the terms were shortened to six months. Multi-year contracts are not uncommon at the international level. But: nowhere else are negotiations on drinking milk as fiercely contested, so strongly accompanied by the media, becoming a political issue and ending with comparatively small margins for all players as in Germany. Where else can the consumer buy the staple milk for only 79 cents per litre, as is currently the case?


No one can yet predict how this move by Aldi will turn out and whether other food retailers will follow suit. The decisive factor will be whether companies such as Arla or FrieslandCampina will (have to) respond to this request. These two companies, along with the cooperatives Ammerland, DMK and Hochwald, as well as Sachsenmilch, which belongs to the Müller Group, set the price direction for liquid milk. The numerous medium-sized dairy companies from Baden-Württemberg and Bavaria, but also from neighbouring Austria, which also bottle milk for the local discounters and supermarkets, will only be able to play an observer role here.


The longer-term guaranteed purchase of liquid milk with contracts for three years, for example, would of course improve planning security of dairies. But the other side of the coin, namely the binding nature of a delivery commitment entered into with the food retail sector and the risk of sanctions for breach of contract, must also be weighed up. Above all, the question arises as to how, with markets remaining more or less volatile, positive market signals in the form of higher milk prices are to reach the dairy farmer? There are already ideas that variable indicators for regular adjustments should be built into the contracts. After all, the decisive “cost factor” for liquid milk is the milk price. The biggest concern, however, is that before the contracts can be adjusted, dairies will have to give the food retailers deep insights into internal figures.

Roland Sossna / IDM

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