TSDG farmers have been contacted informing them of the review’s conclusion and a conference on Thursday 5 November will give them an opportunity to hear more about the changes that come into force on 1 February 2016. TSDG farmers will need to sign a new Tesco contract supplement as part of this review. Processor meetings will be held in the next few weeks.
Main points:
- Independent cost tracker is maintained
- All TSDG members will need to submit farm business accounts to Promar – costs will be paid for by Tesco and there will be no bonus for doing this (currently this is voluntary with 85% uptake and there is a 0.5ppl bonus)
- All TSDG milk will be supplied by core producers
In more detail:
1. Increased number of core producers – to be decided by the milk purchasers based on the balanced scorecard and geographical location.
2. Balanced scorecard introduced based on the values of quality, value, innovation and service (more below). TSDG members will be measured annually on these and they are weighted according to Tesco’s current priorities (75% based on animal health and welfare and C footprinting):
- Quality: animal welfare (through the livestock code of practice), farm and milk quality standards
- Value: Carbon footprinting, level supply, segmentation (plans for succession and next generation)
- Innovation: sustainability, environmental, professional and engagement with Tesco
- Service: public engagement (eg Open Farm Sunday, store roadshows, future farmers scheme) and TSDG engagement (cull cow and calf initiatives, scholarships etc)
3. Rewarding performance and encouraging improvement – the top 5% of producers (based on the balanced scorecard) will receive an additional 100,000 litres to produce within their TSDG core literage. The lowest performing producers will be issued notice of 6 months. During this period they will receive support to improve overall rating with a follow up review in 3 months. This threshold will also be 5% (but can be reviewed at a later date).
4. A waiting list will be established based on geography and the balanced scorecard. A TSDG core reserve pool will also be built in for young/ new entrant farmers.
5. Independent Cost Tracker – all TSDG members will be required to submit farm business accounts to Promar.
6. Milk price will be updated on a quarterly basis based on actual farm costs
7. The processor price matching clause will be removed (but can be reviewed under exceptional market circumstances)
NFU comment:
NFU dairy board chairman Rob Harrison said: "This progressive and balanced review has given Tesco the opportunity to reflect on all aspects of their TSDG model. We believe that changes were necessary for the long term sustainability of the group and to deliver value to both Tesco and its customers. Tesco has consulted widely with the current TSDG members over recent months and importantly have honoured their commitment to keep the independent cost tracker.
"We’d encourage those farmers within the TSDG to engage with Tesco both at the TSDG conference on Thursday this week and at processor meetings that will be arranged over coming months."
* Tesco’s long term support initiative for cheese is yet to be developed.