UK Food Producer Uses Cheese to Plug Pension Fund Gap

UK food producer Dairy Crest, whose product range includes best-selling cheese, butter and milk brands, will use £60m of maturing cheddar to reduce its pension fund deficit.

Under an agreement with its pension fund trustees, in the event that the company becomes insolvent the trustees will become owners of 20,000 tonnes of cheese and have the right to sell it.

Dairy Crest typically has around £150m worth of maturing cheese in its warehouse. As stocks are replenished, the pension fund trustees will retain floating ownership of £60m worth of stock. The company, which has felt the impact of a price war between the UK’s major supermarkets and blockades by farmers demanding improved payments for milk in recent months, had a pension fund deficit estimated at £84m last September.

The deal echoes a similar arrangement reached by spirits group Diageo in 2010, when it agreed to transfer 2.5m barrels of maturing whisky, with an estimated value of £500m, from its stocks to close a £862m deficit in its pension fund. Truly, the deal gave a new meaning to the term liquidity.