Household

Dairy Crest’s Household business delivers Country Life fresh milk and a wide range of other products. It has 1.3 million residential customers, 20,000 business customers ranging from coffee shops to hospitals, and supplies milk to around 600 independent dairymen, most of whom have their own residential customers

The business has an extensive distribution network across England and Wales, with over 3,000 employees and another 1,500 franchised milkmen, 130 depots and 3,000 vehicles. Milk is bottled at dairies located at Aintree in Liverpool and Hanworth in London.

The year ended 31 March 2010 may turn out to be a pivotal one for our business. During the year we completed the national roll out of our internet-based, doorstep delivery service, ‘milk&more’. This gives our residential customers a contemporary shopping experience delivered by the traditional milkman. It allows consumers to order over 200 products through the internet up to 9pm in the evening for their next doorstep delivery and puts us firmly in competition with convenience stores for top-up purchases. Having previously carried out local trials of milk&more, we launched nationally in September 2009 and set ourselves the challenging target of recruiting 250,000 registered users by 31 March 2010. We reached our target with one day to spare! milk&more users already spend more with us and our milk&more website allows us to target promotions of milk and other products which will further drive doorstep sales. For many years these have been declining as consumers choose to buy more of their milk from other outlets. However a successful implementation of milk&more could reverse this trend. It has already made a significant difference to the annual decline rate which fell back from 10% at the start of the year to 6% at 31 March 2010. We have maintained this improved performance since the year end. milk&more moves us from being a somewhat outdated delivery service firmly into the modern day and the feedback we are getting suggests our customers love the modern approach to a familiar tradition. Our milkmen have adapted well to the different demands that milk&more places on them and appreciate the benefit of having to collect less cash because customers using milk&more pay either by electronic card or direct debit.

During the year turnover in the Household business fell due to the ongoing decline of doorstep deliveries and the sale of sixteen unprofitable middle ground delivery depots in June 2009. However profitability has improved, despite higher marketing costs arising from the roll out of milk&more. We implemented a strong cost reduction programme, including closing our glass bottling operation in Fenstanton, Cambridgeshire, and the reorganisation of our non-milk supply chain. Milk costs were also lower following purchase price cuts early in 2009.

Furthermore we have identified that we may be able to make further cost savings by leveraging recent investments in IT systems. In February 2010 we initiated a pilot programme to evaluate the potential benefit. This project is progressing well and will lead to substantial savings in our cost base.

We continue to innovate around Dairy Crest’s key themes of health and the environment. During the year we started delivering 1% fat milk, a lower fat alternative to semi-skimmed, to our residential and business customers, and we have also trialled the milk packed in bags, described more fully in the Liquid Products and Ingredients section of the Business Review. The bags use 75% less packaging than polybottles and further enhance the environmental credentials of our doorstep delivery service, which also offers milk in returnable glass bottles and electrically powered milk floats.

Looking forward our focus will continue to be on making milk&more successful. We will aim to provide service excellence so that on-line customers spend more with us and continue to recruit more customers for milk&more. We will also continue with our cost reduction projects.