FDBusiness.com

Britain’s largest dairy co-operative, Arla Foods, is planning long-term investments in its UK supply chain, key sales channels and market leading brands like Arla Cravendale®, Arla B.O.B®, Arla Lactofree®, Lurpak®, Starbucks™ and Anchor®, as it makes clear its plans to become a leading household name.

Over the next five years, Arla looks to grow its UK business through a combination of branded and added-value private label innovation in prioritised categories like liquid milk, yogurts, butter and spreads, milk-based beverages and cheese. The ambition is to grow the branded share of the revenue to 45 per cent from 38 per cent.

The company will continue to take an industry lead on data-driven sustainable dairy production that meets the 1.5-degree goal set by the Paris Agreement.

In the next five years the Arla Group will increase its investments by more than 40 per cent to Eur4+ billion (around £3.4 billion) in sustainability actions, product innovations, capacity expansions and digitalization. As the single biggest market in Arla’s global business, this will also mean increased investments for Arla’s UK operations, with a focus on efficient and sustainable production and categories and channel opportunities such as added-value milks, foodservice and ecommerce.

As previously announced, Arla also targets more than 50% growth across its UK organic retail and foodservice business in the next five years.

“This growth and value-up ambition is about improving the value of dairy for our consumers through high quality products that meet their demands, for our retail and foodservice customers as we add category value and growth, and for farmers through a sustainable farmgate price,” says Ash Amirahmadi, Managing Director of Arla Foods UK.

“The milk that goes into products like Cravendale®, B.O.B® and Lactofree® dairy products comes from Arla’s farms, where our owners are already among the most climate efficient dairy farmers in the world, producing milk with around 50 per cent fewer emissions than the global average. But with an ambition to reduce on-farm emissions by an additional 30 per cent by 2030, big investments are still needed on farms. Therefore, in the UK, our Future26 strategy will ruthlessly focus on creating the maximum value of all our milk that enables dairy farmers to invest more in on-farm long-term sustainability measures.”

Improving the profitability of UK liquid milk category

Liquid milk will be Arla’s flagship category in developing the sustainability agenda from farm to store. Arla will work with its customers to lead the category sustainability proposition and significantly improve the profitability so that its farmers can cover their increased costs and also invest in the on farm sustainability agenda.

“For a number of years, we have indicated that the lack of profit in own label liquid milk in the UK is not sustainable. It delivers little to no profitability for farmers and is a category of the UK dairy sector where the market is failing to deliver value for farmers. It is unsustainable. This is made even more critical by the fact that the costs of producing milk is increasing like never before and our farmers are continuing to experience significant inflation,” says Ash Amirahmadi.

Explore export potential for Arla’s UK milk

As global demand for dairy continues to outgrow international supply, the value of milk and dairy products on the world market has shifted to a new, sustained high level. This shift means more opportunities for Arla to increase the value from its UK milk and subsequently the returns for the farmers that own the cooperative.

As part of its Future26 strategy, Arla will therefore also explore opportunities to begin exporting raw milk from the UK to supply Arla’s global supply chain and has begun trials to move milk to its European processing sites as a means to supply its growing international sales of sought-after dairy products and to improve the profitability of UK milk for its British and European farmer owners.

Peter Giørtz-Carlsen, Executive Vice President of Arla Foods Europe comments, “With farmer owners and production sites across Europe we have the opportunity to use the scale of our cooperative to create the most value from the milk produced on our farms. Demand for Arla dairy products is growing in Southeast Asia, the Middle East and West Africa, and so it is natural for us to explore how we can best utilise our European milk pool to meet that demand. This includes the milk from our British farmer owners.”

Recruiting new farmers to meet increasing global milk demand

To deliver the scale of growth across its global and UK strategy, Arla will explore the need to recruit more milk from existing and potentially new farmers, including in the UK.

Global demand for dairy over the next five years is estimated to continue to increase by 2 per cent year on year. However, there are clear signals from milk producers around the world that the increases in supply required to meet that rising global demand are now far less certain.

“To meet these future demands and maintain the cost effectiveness of our supply chain, we will welcome and continue to support members who wish to help us grow our milk pool by increasing their supply and growing their businesses sustainably. While we are not recruiting as of now, we will also investigate opportunities to gradually open up for new members or contracted milk who share our farmers’ commitment to producing high quality milk more sustainably,” says Ash Amirahmadi.