Chairman’s Report

EXECUTIVE LEADERSHIP TEAM 2020/21

NICK WHELAN

Group Chief Executive

KEITH AGNEW

Managing Director of Agri Division

STEPHEN CAMERON

Group Commercial Director

CHRIS MCALINDEN

Group Operations Director

OLIVER MCALLISTER

Group Chief Financial Officer

NASAIR HUSSAIN MIKE DAWSON

Group HR & Corporate Services Director

Managing Director GB & Group Supply Chain and Procurement Director

BUSINESS REVIEW

PRODUCT INNOVATION

2020/21 was undoubtedly a challenging year due to the Covid-19 pandemic. Through the early part of the year, the business focused on maintaining a safe working environment, processing members’ milk and servicing our customers. To assist, the NPD team was temporarily redeployed into site functional roles for five months across the Group central laboratory, Dromona, Mullins and Dunmanbridge sites. Therefore, the levels of product launches were lower than previous years.

Despite these challenges, 116 new and rejuvenated products were delivered in 2020/21 across brand and own label. New branded products included a Dromona Low Lactose Mature Cheddar range, Dale Farm Low Lactose Milk and the ever-popular Sukie drink in a 1 litre format. The business also launched 11 new ice cream products which included Rapture variants as well as Mullins tub products. Innovation in own label continued with new products and pack formats introduced in both the fresh and cheese categories.

PROCESS INNOVATION

Several initiatives were undertaken in cheddar processing to improve the operational consistency and yield, which led to significant improvements during 2020. Data collection and interpretation played a key part in this and further progress is expected in 2021/22.

Work is ongoing to minimise the beta-carotene carryover into the whey from red cheddar production. This will improve the functionality of the whey and reduce operational costs.

COMMERCIAL & OPERATIONS

CHEESE

Our cheese business had a good year in terms of performance and investment, despite the unprecedented times we faced. There were pricing challenges during the year which have been addressed.

Overall, our sales volume was slightly behind, driven largely by a significant loss in foodservice due to national lockdowns. This flowed into our ingredients channel, where volume was down 16%.

However, retail sales increased as inhome consumption grew with strong performances from brands and own label consumer packs, which grew 16.3% and 10.3% respectively.

Our retail business continues to benefit from our partnership with key value grocery retailers Lidl and Aldi. Our total volume across both retailers grew by 13.3% in GB, outperforming the total cheddar market at 10.4%. The popularity of cheddar continues across Europe throughout the pandemic, with Lidl launching in two new markets, Estonia and Latvia.

Production output was at a record level, growing 9.3% which helped drive yield improvements.

Social distancing guidelines employed at factory level resulted in an increase in labour costs and overall production cost per tonne.

The programme of LEAN manufacturing improvement continues across both our Ash Manor and Dunmanbridge sites.

For a second year, we have hit a record level of bulk cheese output, achieved strong cheese yield performance and introduced a new coloured reduced fat cheese recipe for Lidl.