Sustainable milk supply for Jersey
Milk production on Jersey is integral to the island’s image and self sufficiency. However, it’s a relatively small industry and the costs of production and processing are higher than are seen in mainland UK. If the industry is to be successful over the longer-term and retain the image, product and environmental benefit for the island then the retailer, processor and producer all need to make a sustainable profit margin.
Kite Consulting has been involved in assisting the island’s Jersey Dairy re-structure and establish a sustainable pricing system for the core volume to meet the island’s fresh market needs.
Sustainable Investment Margin - CAPEX
The methodology for a sustainable Investment Margin or CAPEX is simple. We want to get to the margin left after all trading expenses of the dairy business have been taken into account including family labour.
We use actual costing information provided by the Island’s producers to establish a sustainable milk price, allowing for an investment margin or CAPEX. The aim is to ensure investment takes place to create a sustainable industry where higher environmental standards can be achieved, costs can be reduced by investment and new entrants can be encouraged into the industry.
The scheme has now been operating for nearly a year and milk prices have now risen by around 9ppl to a level where we believe the industry will be sustainable. Confidence is starting to increase in the industry and investments are planned.
Next steps are to start to grow the market for value added dairy products from the island which will be coming from a new dairy that is being built on the island.