Arla: growth due to investment, brand strength and farmer owners

2014 was a year of growth for Arla Foods UK, the UK’s number one dairy company, despite challenging global conditions. At 2.8 billion euros (£2.3bn) the UK continued to be the largest market for Arla Foods amba representing 27 per cent of the group’s revenue.

In line with group performance a strong first half of the year was impacted in the second half by downward pressure on worldwide prices for commodity products, driven by increased global supply and weakening demand, predominantly as a result of the Russian trade embargo on dairy products and weakening growth in China. In response, Arla implemented a number of key measures to maximise revenue and minimise costs in order to continue delivering a leading milk price despite challenging times for its 13,500 owners, including its 3,000 British farmer owners.

Significant UK developments during the year included the official opening of the world’s largest fresh milk facility¹ at Aylesbury, Buckinghamshire, the roll out of the biggest cheddar cheese contract in the company’s history and further measures to pave the way for the increased presence of the Arla brand in the UK market. Arla launched a number of new products during the year including Anchor Cheddar, Lurpak Cook’s Range, and Cocio Chocolate Milk. Against a backdrop of declining category sales, key Arla brands Lurpak, Anchor and Lactofree delivered growth and Cravendale was able to hold its share in an extremely competitive fresh milk category.

To support business growth and strengthen its position as the number one dairy company, last year Arla continued to invest significantly in the UK, not only at its state-of-the art dairy at Aylesbury but also in new technology across several sites, such as its packing operation at Oswestry, Shropshire, where it has created new packing facilities for Anchor Cheddar and own label cheese. These investments will enable the business to create new and exciting product ranges in 2015 particularly for the Arla brand where the business will focus on the inherent naturalness of dairy. This investment will continue in 2015 with almost £40 million being spent by Arla across its UK sites.

Last year saw Arla launch ‘Support our Farmers’, a major campaign to unify British farmers at a time of lowering milk prices. Launched in October, it called on shoppers to support dairy farming and Arla farmer-owners directly by buying Arla’s well-known branded products such as Anchor, Cravendale and Lurpak. The initiative also helped Arla farmers engage directly with their local communities and raise awareness that they are owners of a dairy cooperative, the profits of which go directly back to them.

Peter Giørtz-Carlsen, executive vice-president, Arla Foods UK, said: “The UK business has delivered in a very challenging market and we have embedded some of the measures needed for sustainable growth in the long-term. We are acutely aware of the continuing challenge, but it is vital we remain firm in our approach to build an organisation that is competitive today and into the future.

“Our focus remains on adding value to our owners’ milk by improving our efficiencies, and having a strong position across all our dairy categories and global brands as well as maximising our revenue by moving our milk into the categories that offer us the best returns. At the same time, we have implemented a number of measures to increase efficiencies and control costs. Together, focusing on increasing brand strength and operational efficiency should help us build upon the firm foundations already in place and ensure we stay competitive in 2015. Our approach is already having a positive effect, for example helping us secure a new three-year contract to supply fresh milk to Morrisons, which directly benefits our farmer owners.”

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