Milk pricing – paying our farmers a fair price
Why do we do this?
When we formed the SDDG in 2007, we paid our farmers a premium over and above the usual market price for milk. But we quickly realised that this didn’t always cover the farmers’ production costs, so we sat down with the group and came up with a model that everyone thought was fair, which the farmers agreed on with a vote.
A great deal for our farmers
We pay our dairy farmers 67% of the sale price of our 4 pint bottles. Click the image below for a closer look.
*5 steps to fair pricing
- Independent consultants visit every farm in our group between May and August each year.
- They look at each farm’s finances and check and record the amount of stuff that goes in (like fuel, fertiliser and feed) versus the amount of milk that comes out.
- Using all the figures from the individual farms, we work out how much it costs, on average, to produce a litre of milk across the whole group.
- We add in some profit, decided upon by the SDDG as a whole.
- We give our farmers an additional bonus to reward them for looking after their herds well, going above and beyond national standards.
Our farmers know they can bank on us
Click on the chart below to take a closer look at how we pay our dairy farners.
And we keep an eye on this price
This five-step process sets the price for the year but, because we work so closely with our farmers, we know that their costs are changing all the time. We go back and check the price on feed, fuel and fertiliser (the 3 key areas which increase farmer’s costs) every 3 months.
For example, if the price of feed goes up, the amount we pay our farmers goes up. And if the price of feed goes down, then the price will go down, even if that means as a retailer, we aren’t making as much per litre when we sell it. We include the cost of feed, fuel and fertiliser in our model so if the price of any of these goes up, we make sure this is reflected.
The current price we pay our farmers per litre is 27.03p.
Some shops do have their own farmers. These include Waitrose, Marks and Spencer, Tesco, Co-Op and Booths and some of these pay their farmers using a cost of production model similar to ours. There are other shops that don’t have their own farmers who get their supply from a dairy that pools milk. If the price per litre changes, it’s split between all their farmers. So if the price paid for milk goes up by 4p for example, this would be split across all the farmers in the pool. With our SDDG model, because we have our own farmers, we ensure that the price they’re paid is a reflection of their costs, so if their costs go up, our model ensures the increase is paid to our farmers.
Click on the below for a closer look at how we source our milk vs the traditional method
The retail price of milk is separate from the price our farmers receive
Click on the chart below to see how much we pay our dairy farmers.
Which all adds up to happy farmers (and happy cows)
So that’s it in a nutshell. Our farmers work with us because they know they’re guaranteed a fair price that they can rely on month after month, and we work with them because we know they’re raising happy, healthy cows.
And there’s more…
Don’t just take our word for it. Here’s what three of our farmers have to say…
*Our 9 Northern Ireland farmers are the only SDDG members that are part of a Co-Operative so don’t receive the COP price. They do get the same benefits that the other members of the SDDG get, including vet visits and milk recordings. And they get a bonus for hitting high health and welfare standards.
**97% of our By Sainsbury’s fresh milk comes from the farmers in our Dairy Development group. We always try to buy all of the milk that our farmers produce, but the amount of milk a cow produces is not the same throughout the year. At certain points in the year (particularly in the winter), our farmers don’t produce enough milk so we need to source other milk from other farms. In spring/summer when production is high, we always buy as much milk as we need to meet our customers’ demand.