Dairy product giant Dairy Crest has lost its contract to supply milk to Britain’s largest retailer Tesco. As part of a cost reduction programme, Dairy Crest has said it is consulting on the closure of two dairies at Aintree, Merseyside and Fenstanton, Cambridgeshire, putting almost 500 jobs in jeopardy.

The dairy company supplies fresh and flavoured liquid milk to retailers, residences and caterers but has claimed that the liquid milk market is currently “extremely challenging.” Dairy Crest said it would transfer work to its three other fresh milk plants in Derbyshire, London and Gloucester.

Although fresh milk accounts for two-thirds of its business, Dairy Crest’s flagship food brands include Cathedral City cheese and Clover and Country Life spreads.

Dairy Crest’s contract with Tesco ends in July and the supermarket has elected not to renew. The company had relied on Tesco for around three per cent of its liquid milk sales and last month said its trading in the fourth quarter of 2011 had been in line with expectations. A company spokesperson said the loss of the Tesco contract was not a factor in its decision to close the two plants.

Commenting on his company’s decision, Chief executive Mark Allen said, "The decision to consult on the closure of our Aintree and Fenstanton facilities has not been taken lightly, but we believe that this proposed restructuring of our dairies business is the right decision for the long term."

Unions USDAW and Unite, which have members at both plants, yesterday confirmed they have entered into consultations. A USDAW spokesperson said the union will examine the company's business case for closure and do all that it can to avoid such heavy job losses. 

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