ARU Arla Foods

RNS Number:2981U
Arla Foods UK PLC
03 April 2007


                                                                   03 April 2007


                               Arla Foods UK plc

          Arla welcomes Tesco's direct deal for British dairy farmers

Arla Foods UK plc, which supplies 40 per cent of Tesco's milk, welcomes the
announcement that Tesco is to offer direct long-term contracts to named British
dairy farmers raising the price farmers receive to around 22 pence per litre.

Arla Foods UK plc supplies approximately 600 Tesco stores with over 370 million
litres of fresh milk each year.

In relation to today's announcement from Tesco, Tim J Smith, Chief Executive of
Arla Foods UK plc said today: "We are delighted with this development. Tesco has
provided a bold and creative step to help the dairy farmers who provide Tesco's
customers with high quality milk.

"Although this move will have no financial effect on our own business, we will
work with Tesco and Arla Foods Milk Partnership to quickly put in place the
necessary systems and processes to ensure the earliest possible implementation
of the new arrangements.

"We are confident the exciting new pricing deal will allow the AFMP members both
a much improved financial return and the confidence to further invest in their
enterprises."

Jonathan Ovens, Chairman of the Arla Foods Milk Partnership commented: "I
believe that the members of AFMP will be delighted by the scale of the
investment being promised by Tesco. We are today celebrating a significant
improvement in the future prospects of those members whose milk will be part of
this programme. We wholeheartedly support this move and thank Tesco for its
commitment to us."

                                     -Ends-


For further information, please contact:

Arla Foods UK plc                                    0113 382 7000
Tim Smith, Chief Executive

Hudson Sandler                                       020 7796 4133
Michael Sandler / Amy Faulconbridge



Notes for editors:
          
     1.   Arla Foods sites at Oakthorpe (north London) and Stourton (Leeds) 
          process pack and distribute fresh milk to Tesco every day.
     2.   Arla Foods Milk Partnership is comprised of over 1,600 dairy farmers 
          who are contracted to supply all their milk to Arla Foods UK plc. 
          By October 2007 their supply will represent 90 per cent of the total 
          milk required by Arla Foods. Approximately 350 members will be 
          affected positively by Tesco's announcement. On average, each produces 
          just over one million litres per annum.



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