THE Government must lead the way in addressing the British milk industry's problems, a supermarket boss told the Semex Milk Summit in Glasgow.

The summit attracted 230 delegates to hear speakers from all parts of the food chain.

Ian Merton, Sainsbury's director of food trading, said: "We in the retail sector will do all we can to help struggling dairy farmers, but it is up to the Government to address the mismatch between milk supply and demand and the low farm gate price."

Mr Merton also believed the key to successful trading was to destroy the myth of milk being a loss leader and purely a commodity.

"We see it as a very valuable product which is an extremely important part of our business," he said. Milk made up 1.7pc of Sainsbury's turnover, cheese 2.5pc and yoghurt 2pc.

"Dairy produce accounts for 23pc of Sainsbury's fresh food sales," he said. "Our objectives are to increase availability, encourage innovation and to boost consumption."

Mr Merton said his company bought a very high proportion of available products from British sources "but we will not buy British at any price".

Sainsbury's also recognised the "unprecedented and acute financial position" of many milk producers and was looking at ways to help the dairy industry.

"Last year we increased the price of a litre of milk by 2p, in the hope this would benefit dairy farmers," he said. "We believe it is part of our responsibility within the food chain to do this ... but we are not solely responsible for finding solutions to the price crisis."

Discussions must be led by Government, and he called on it to provide a vehicle to make progress.

Sainsbury's had formed its own dairy farming forum, attended by key figures within the industry, including farmer groups and milk processors. "Its job is to find ways to deliver milk and milk products efficiently and to promote and effectively market the benefits of milk to our customers and to the industry at large," said Mr Merton.

Sainsbury's was carrying out trials and projects in its stores to investigate the impact of availability on fresh milk sales. With the Milk Development Council and two other supermarkets, it was studying the effect of allocating a dedicated person to keep shelves stocked with milk throughout opening hours.

"Sales data is still being assessed," he said, "but we believe the gains could be massive by keeping shelves full and appealing throughout the day."

Mr Merton saw adding value to milk as another key way to encourage consumption, particularly through the creation of innovative products. Sainsbury's had launched a premium Taste the Difference milk, from a Guernsey herd, in 39 stores just before Christmas. It was proving so popular that it was being introduced to 300 stores.

Last summer, in association with the Wildlife Trusts, it had launched a trial of White and Wild milk, from farms operating wildlife conservation schemes. Introduced in 60 stores, it was being extended to another ten. Regional milk lines, local and speciality cheeses were also selling well.

Sainsbury's had supported the Little Red Tractor logo from the start. It was about to be launched on Scottish milk; all the company's cream products would carry it from the end of February and cheese products would follow in March.

"We've done a lot of work on packaging, to make it easier for customers to find produce. Our labelling has been made much clearer, giving milk a better in-store image and moving away it away from being regarded as a commodity," he said.

The company had also introduced in-store leaflets extolling the benefits of milk and illustrating ways of using it in recipes. A new range of Be Good to Yourself milk drinks was about to be introduced and the company was launching a free school milk scheme, where vouchers were exchanged for free milk for a week, to encourage children to drink more