Delays in milk shake-up
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by Amanda Bradbury • Milk haulage worth -'£120m is on course to be " offered to operators next year!
But its potential growth could he hampered by delays in tendering and a -'"--damaging war of words as vested interests battle to *save their slice of a more competitive marketplace. 4 This is the fear expressed this week by both existing 'milk Wiers and potential entraeits following Government criticism of the market's deregulation rfainr,plans.
Additional Ministry of Agriculture scrutiny means that the first freed milk haulage contracts are unlikely to be awarded on the current deadline of 1 April next year. This first round of tendering involves 23 depots handling 30% of milk moved from farms to purchasers in England and Wales.
I
k Agriculture minister Gillian Shephard has the power to stall the whole deregulation process by not agreeing to the Scheme of Reorganisation by monopoly player the Milk Marketing Board. This would also hamper a second and third round of tendering by the MMB during next year.
But Shephard is not likely to do so, as the legislation is already in place enabling the freeing of the market to go ahead.
This is good news for hauliers because they have a lot to gain from a freed market. Even though volumes carried will not increase, the more fragmented milk transport becomes, the more it will be worth. Ending the closed shop in milk transport is expected to increase its value significantly, But some operators say this extra haulage is under threat because of the "anticompetitive" way the Milk Marketing Board is reorganising.
They point out that current milk haulage contracts tied to the first 23 depots to be tendered are due to be transferred automatically to a company handling the remains of MMB business. Milk Marque, as the off shoot is called, will therefore retain a dominant position in milk haulage market following deregulation.
Market knowledge, quality control and vehicles will effectively remain in the hands of the MMB until the last minute, say critics, leaving competitors with left-over assets which the board does not need. Some dairies and hauliers say this would torpedo the central aim of deregulation and hinder entrance to the market.
Milk users such as Northern Foods, who wish to buy and collect direct from farms, are more likely to attack the MMB publicly on these grounds.
Chairman of Northern Foods Dairy Group Trevor Blackburn says: "We are extremely concerned by the Milk :Nlarketing Board proposal to assign all existing haulage contracts to Milk Marque," Meanwhile, those operators who are taking a "keen interest" in the NIMB tenders, and who wish to contint e buying some of their in ilk from the MMB as Milk Marque, are less likely to .. consider the MMB's plans as unfair to new entrants.
Unigate is believed to want to buy its 1.6bn.litpe annual milk requirement from three sources: from Milk Marque; direct from farms; and through farmers' representatives.
Unigate subsidiary Wincanton's head of milk and foods Keith House says: "We don't have a major issue with the MMB's haulage plans."
For the first time MMB operations and transport director David Yeomans has hit back at his critics, saying that it is not the MIVIB, but the four major hauliers who work for the board (see box left) who are attempting to hinder entrants to milk transport.
"Over the past five years," says Yeomans, "the four have acquired a third of the MMB's independent haulage, carried out haulage exchanges and got themselves into a monopoly position-40% of the haulage they carry out is for their competitors. They have delayed replacing at least 200 vehicles so they can tie up manufacturers at this crucial time. One of the four has just ordered 40 tanks." Yeomans also offers an audit of the way the tanker fleet operates.
This lack of consensus in the milk industry is not cheering hauliers considering entering its haulage market. These are said by the Milk Marketing Board to include "every major UK player in haulage"— United Transport, Bi h by Distribution and TNT are believed to be among them.
Discouraged
Some potential entrants are also discouraged by what they see as the double whammy of entering the market. This is the .uneer tainty surrounding Government approval alongside what some view as the way the Milk Marketing Board is forcing the pace. For example, the board has continued to insist that completed tender forms, based on the plans criticised by the ministry, are in by 7 January next year. The board admits that the day when the contracts can be awarded will change—it has set a substitute target date of 14 days after ministerial approval of the Scheme of Reorganisation.
But Yeomans dismisses the idea that new entrants are discouraged. He predicts that half the milk haulage market will he in the hands of new players by January 1995, if ministerial approval is given to the timetable.