FDBusiness.com

Arla Foods has unveiled a revised strategy designed to adapt its business to the abolition of EU milk quotas in 2015. A significant new aspect of the revised strategy is that Arla is increasing its focus on markets outside of the EU.

Over the next five years Arla Foods plans to increase its focus on Russia, China and the Middle East & Africa region and aims to double sales of ingredients to the food industry. Regarding Arla’s core markets in Northern Europe the main focus will move from expansion to increased profitability and innovation.

”We now increase our focus on Russia, China and the Middle East & Africa region. Our export to these markets is growing rapidly, and we will work hard over the next five years to build on the massive potential that these markets hold for Arla’s products,” says Peder Tuborgh, chief executive of Arla Foods.

Defining Russia, China, Middle East & Africa as strategic growth markets will see Arla increase investment in marketing, distribution networks and co-operation with local partners in these markets between now and 2017. By 2017 the overall revenue from Arla’s strategic business generated in these markets is set to increase from approximately DKr3.5 billion to DKr10 billion (Eur1.34 billion).

The abolition of EU milk quotas in 2015 is the main driver behind Arla’s decision to revise and extend the global strategy despite there being three years remaining for the current strategy. Without EU quotas it is anticipated that Arla’s milk farmers will produce at least one billion kilos of milk more each year than today. The extra milk cannot be sold as profitable products in the EU due to growth stagnating.

In recent years, Arla has strengthened its positions in its core markets in the UK, Sweden, Germany, Denmark, Finland, and the Netherlands. According to Strategy 2017, these markets must continue to be developed, but with more focus on refining activities, not primarily through expansion via mergers and acquisitions.

Arla Foods will continue to focus on the three global brands of Arla®, Lurpak® og Castello® while striving to strengthen its ‘Closer to Nature’ position.

One of the most profitable areas within the Arla Group is Arla Foods Ingredients (AFI), which is responsible for the production and sale of whey protein and lactose- and milk-based ingredients to the food industry. The target for AFI in Strategy 2017 is to double its revenue globally from approximately DKr2.5 billion to over DKr5 billion.

Another focus area in the revised strategy is to continue to operate a sound and effective business where everyone is focused on cost and new ways of working. ”We have launched a large number of programmes that will enable us to work faster, leaner and more simply. Our overall objective is to save DKr2.5 billion by the end of 2015. This is essential in order to be able to invest in new growth and remain competitive,” says Peder Tuborgh.

The revised strategy which takes Arla to 2017 builds on the previous strategy and is a further development of Arla’s strategic direction, rather than a fundamental change. In the revised Strategy 2017 there is no overall revenue objective, which was one of the focal points in Strategy 2015.

”We are four years into the 2015 strategy period and have achieved many of the strategy’s objectives, and are close to the revenue target of DKr75 billion. Our recent growth must deliver an even higher return to our co-operative owners, and releasing Arla’s new potential is a major task. This is one of the main elements in Strategy 2017. Even though revenue will naturally increase during the next five years, the main goal is profitability,” explains Peder Tuborgh