AVONMORE Foods is likely to be one the beneficiaries of any restructuring of the British liquid market and could spend up £100 million on an acquisition to boosts its presence in the market say London stockbrokers ABNAMRO Hoare Govett.

But Hoare Govett - an ABNAMRO associate of Dublin broker Riada - has warned that Waterford Foods is not in a strong position to benefit from any corporate shake up in the British liquid market. "Waterford is not well positioned to exploit the likely restructuring of UK liquid milk. With significant group debt on the back of its acquisitions spree, Waterford is unable to consider further investment," says the broker.

Hoare Govett also warns that on the assumption that the British market will become increasingly dominated by a handful of powerful national suppliers, weak regional companies could become isolated.

"This scenario poses challenges to Waterford's group strategy. Should it attempt to maintain its existing position in Manchester and risk being picked off or squeezed out by the evolving larger groupings? Alternatively, could it sell its liquid milk business and concentrate on cheese making where it has attained an established national position?"

Hoare Govett also raises what it admits is a more radical option - combining Waterford's milk business with the midlands based business of Avonmore to create a larger entity with 15 per cent of the market and strong finances.

Overall, the Hoare Govett report is positive about the prospects for the British milk market, with lower prices from Milk Marque offering processors scope to grow profits.