A new report into the challenges faced by UK cheddarmakers and the impact they could have on the future of the cheddar market is launched today by John Allen, Kite Consulting, Erik Elgersma, Strategic Analysis Services BV and Chris Walkland, The Walkland Partnership Ltd.

 Chewing the Cud on the UK Cheddar Market: This time it's different outlines how the current market conditions are adversely affecting the security of cheddar supplies for the UK market, with short-term thinking currently prevailing over a sound long-term sourcing strategy.

 "Cheddarmakers find themselves in the midst of a perfect storm caused by weak demand due to inflationary price increases at retail level, a large cheesemake on the back of strong milk volumes, expensive stocks valuations from record milk prices, the high cost of borrowing, and a weak negotiating position with retailers," said John Allen, Director of Kite Consulting.

"Some cheddar processors are undoubtedly vulnerable and there is a real risk of long-term damage to the sector unless there is a greater understanding of how the supply chain works, and greater buyer empathy towards the challenges it currently faces. Importantly, work on sustainability in the sector will be hampered by the inherent lack of profitability current seen in the sector."

It is, he adds, extremely damaging for the long term future of the industry. UK retailers need a strong, viable UK-based cheese value chain, or they will choose to sell abroad. Time and investment to develop these export markets has already been invested by some players. Once these markets have been created, they will start to take priority. This is an extremely bad dichotomy for the sector in the long term, and due warning is given in the report on this if it was to continue

The report's authors emphasise that it is not in the longer-term interest of UK retailers to squeeze UK cheddarmakers until the pips squeak, "as is happening now". Doing so will only push them and their farmer suppliers into further losses. The net result will be less UK milk and cheese available for the UK market as the number of cheesemakers and their supplying farmers decline.

The report concludes by saying that retailers who have understanding and empathy, and who are prepared to work with their supplier, will find they will go the extra mile for them. In contrast, those who don't will increasingly see cheesemakers supply their products elsewhere. These retailers will lose out, because over time they will lose the best suppliers and the best products.

"UK retailers need a strong, viable, UK-based cheese value chain wanting to supply them, or they'll be left with average products from average factories with average service levels," says John Allen.

 He hopes the report will open the eyes of people in the supply chain who perhaps don't realise or understand the challenges that cheddarmakers are facing, what the dynamics are in the market place, and what the long-term impact will be if nothing changes. For example, processors who sell into the liquid market are paying their farmers a better milk price than cheesemakers, he points out. If this was to continue in the long-term then milk will migrate from cheesemakers to liquid processors, further eroding the amount of cheese being made. On top of this, there will be more cheddar exported into better paying markets.

 "It is in the interests of the whole supply chain to recognise the challenges and the pressure points on farmers and manufacturers on the cheddar supply chain. With some types of cheddar taking many months to store and mature the sector needs long-term strategic thinking, not short-term knee-jerk buying policies," John Allen concludes.