2 Feb 2010 ---- Sainsbury's has announced plans to strengthen its milk sourcing base to accommodate its ambitious store expansion. The supermarket aims to grow total store space by 15% by March 20111 and has recruited milk supplier Arla based in Leeds to help provide the additional volume of milk required.

As part of the deal, Sainsbury's has also committed to invest an extra £40m in British dairy farming over three years, through its groundbreaking Sainsbury's Dairy Development Group (SDDG).

Under the new arrangement, Arla, which previously only supplied Sainsbury's with own brand fresh cream and butter, will now distribute to around 70 stores, mainly in the Eastern region. Existing milk suppliers, Dairy Crest and Wiseman, will continue to supply to the rest of the estate, while family-run supplier Graham's Dairies continues to supply organic milk to Scotland, and one pint cartons nationally.

Sainsbury's business unit director for fresh & frozen foods, Simon Twigger, believes the new structure will provide Sainsbury's with a long-term and sustainable milk supply.

He said: "This is a strategic decision, which we believe will help build our supply chain for the future growth of the company and enable us to meet our customers' needs more efficiently. 

"At the heart of this re-structure was the drive to ensure farmers get the best possible deal, while at the same time ensuring that we can continue to offer customers a competitive price.

Jonathan Ovens, chairman of Arla Foods Milk Partnership, the group of dairy farmers who supply milk to Arla Foods, said: "I'm delighted that Partnership members will be supplying milk to Sainsbury's and will become part of the successful SDDG. I look forward to developing our relationship with Sainsbury's going forward."

Sainsbury's growth plans will see an expansion of the SDDG, a scheme launched three years ago, through which farmers receive an additional premium per litre for good agricultural practice. Sainsbury's has committed to invest £40m in this group over the next three years, a significant increase on the £16m invested over the past three years.

Funds from the SDDG are available to Sainsbury's dairy farmers, for investment in key on-farm initiatives in the areas of herd health and husbandry, environment and energy, collaborative working and business improvement.

When the new structure comes into effect in October, up to 25 new farmers will join the group, which currently consists of 325 dairy farmers in six milk fields in Great Britain, and a further 9 dairy farmers and an additional milk field in Northern Ireland, which joined the Group last Autumn.

William Goodwin, SDDG Dairy Crest farmer said: "I am really pleased that Sainsbury's continuing growth has resulted in the opportunity for more dairy farmers to benefit from the Sainsbury's Dairy Development Group. This mutual success is reward for the hard work and commitment by all those involved with the SDDG and bodes well for the future."

"The SDDG has undoubtedly made my farm more profitable, and if more farmers are joining the group, it can only be a good thing for the dairy industry."

The scheme is in its 3rd year now, and has brought about real benefits to farmers including better herd health and welfare, reduced environmental impact through carbon footprinting, as well as IT equipment and free training.

Sainsbury's currently sells over 470 million litres of fresh milk and 18 million litres of fresh cream each year. It was also the first supermarket to introduce own brand 1% milk which now accounts for over 10% of milk sales.