Wiseman Showing It Has Got the Bottle to Succeed; City Correspondent Cheryl Cole Looks at Robert Wiseman Diaries to See If the Proposed Milk Tie-Up Will Deliver

Article excerpt

Keane by name and keen by intent is Robert Wiseman's finance director Billy to dismiss any notion that a tie up between rivals Express Dairies and Denmark's Arla will prove anything but good news for the country's largest milk distributor.

Billy Keane will also tell you Wiseman is coping.

Coping with this summer's hiatus in the milk trade, consolidation in the industry and among its supermarket clients, and constant allegations it is milking Scottish retailers.

Robert Wiseman Dairies counts itself lucky to have won two significant chunks of business in the spring, giving it all the growth it needs for this current financial year and time to sit back and let the drama unfold around it.

It started with Wm Morrison's threat to put a spanner in the works when it made its January bid for Safeway. Then came Express and Arla's announcement they wanted to become the new super force -albeit lacking the technology -in milk distribution.

It all left retailers and supplier unwilling to finalise their next move.

Wiseman has told the Commission, 'we would not be distraught,' if it blocked the Express/Arla deal as both Arla and Express have made it very much the plank of their strategy.

'If it is blocked then their strategy is in tatters,' says Mr Keane.

Express has already indicated that it will not make cost savings this year as it waits for the merger to go ahead.

'We find that a strange philosophy. If there are things you need to do in your business, don't ever wait on a merger,' says Mr Keane.

Express/Arla have also been warned they may have to divest some of their older dairies in London and the South East to stand a chance of toppling Wiseman from its position as the number supplier of milk in the UK.

Mr Keane, an advocate of organic growth -not of the cows that supply it with over one billion litres of milk per year -of the business says he would not be in favour of acquiring older dairies, but he would keep an open mind.

Wiseman, the largest supplier of milk to the supermarkets, understands it will slip in the ratings but hopes to benefit from the fall-out from customer overlaps if the proposed merger goes ahead.

'The combined Arla/Express account for Tesco moves to 45 per cent post the merger, having some ramifications and opportunities for Wiseman to grow through offering a better service,' says Mr Keane.

He is also keeping a close eye on the acquisition of Safeway.

Wiseman supplies around 50 per cent of Safeway's milk or 165 million litres. However Safeway has a big exposure in Scotland (115 stores out of group total of 480) where Wiseman is the milk supplier.

Wiseman is probably the only processor who can sensibly service this market, say analysts.

If Morrison were the successful bidder, they are currently 100 per cent supplied by Express (155 million litres) but its unlikely an account the size of Morrison plus Safeway (485 million litres) would have just one supplier and definitely not one that is planning a major overhaul of its assets in the next two years -far too risky, say pundits.

'We await, with interest, the outcome of the Competition Commission Inquiries into both the proposed takeover of Express Dairies by Arla Foods and the possible acquisition of Safeway,' adds Mr Keane, leaving out the part about the inquires into its practices north of the border.

The Office of Fair Trading ended its probe into possible price-fixing in milk sales in Scotland, saying it is not worth committing further resources last October. Robert Wiseman Dairies said it was 'delighted'. Express Dairies, which complained, was 'surprised.' Analysts do not expect any problems for Wiseman and believe any weakness that makes itself apparent in the shares is a buying opportunity.

'Wiseman supplies around 110ml to the Scottish mid-market and the profit on this literage is around 3p per litre -giving an operating profit of pounds 3 million,' says broker WestLB Panmure. …