It’s interesting to note that Strathroy Dairy is seeking to recruit a few milk suppliers in specific parts of Northern Ireland, where it will be convenient to pick up the milk as part of an existing collection run – Ballygawley, Dungannon, Portadown, Dromore and Nutts Corner.

This is undoubtedly a ‘cherry-picking’ exercise, as the company aims to minimise its costs by collecting milk within a tight area and only from large suppliers (well over 1m litres/year).

This is part of the business model operated by Strathroy and it seems to have helped it to survive, and indeed to expand, through times when other dairy processing businesses have closed down, merged or were taken over. Strathroy Dairy and United Dairy Farmers (UDF) are the two main locally owned milk processing businesses remaining in NI.

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According to Cormac Cunningham of Strathroy, the company is looking to add 30-40m litres of annual supply, with a strong proportion of winter milk, to service expansion in the business at this time.

One of Strathroy’s main points is that, if not satisfied, the producer will be free to move without notice – not being tied to a contract with penalties for quitting.

Being a company primarily focused on the supply of pasteurised and packaged liquid milk and cream for retail sale, Strathroy needs its supply profile to be as even as possible throughout the year. Milk not required for daily processing during peaks in supply has to be traded on.

That isn’t an easy deal to make when milk is in surplus, and it requires good relations with other processors. However, Cunningham says that Strathroy is guaranteeing that its base price will not drop below 20p/litre. With dairy commodity prices currently very low, the liquid milk business is better than most other options.

Asked about the prices obtainable from customers for liquid milk, Cunningham confirmed that Lidl in Northern Ireland is paying the equivalent of 28p/litre plus processing costs – the amount that it recently indicated it is paying to suppliers across all of the UK. But that deal doesn’t apply in the Republic of Ireland, or for other customers in NI.

He added that Strathroy Dairy puts that income from Lidl into the total revenue generated by the business to be shared across all suppliers – it isn’t directed specifically to producers who supply the small volume of milk that is required to service Lidl’s needs in NI.

That is a relatively small proportion of the total volume of milk handled by Strathroy – it’s major customers include Aldi and Lidl in the Republic of Ireland, SuperValu and Centra own-label milk in NI, and numerous small independent retailers that take Strathroy’s own-brand milk and cream.

The company also supplies cream to most of the main retailers in NI.

The pricing of Strathroy supplies to the biggest customers takes more account of dairy commodity market prices – so it isn’t making huge margins on much of its milk when commodity markets are low, but has some room for negotiation with the buyers when commodity prices rise.

The company operates on very tight margins at times, but the key to its growth seems to have been its level of customer service and its relationship with the German-based retailers, which have expanded remarkably in the Republic.