Arla Foods reports positive results for 2019

Group revenue increased but the UK subsidiary Arla Food UK faced challenges

Farmer-owned Arla Foods increased its group revenue to €10.5bn (£8.8bn) in 2019, from €10.4bn (£8.7bn) in 2018. Arla’s global brand portfolio achieved a year-on-year branded sales volume increase of 5.1%.

The Scandinavian co-op, which is owned by farmers across seven countries, witnessed a 5.1% volume growth in branded sales, compared to 3.1% in 2018, a performance mainly driven by the Arla brand.

Global revenues of the Arla brand grew to €3,033m (£2,544m) compared to €2,875m (£2,411m) in 2018, which it attributes to a series of successful launches across its Lactofree and organic ranges, the introduction of new flexitarian options for semi-vegetarian diets as well as the rapid growth of Skyr in core European markets.

The profit share was 3% of revenue, in line with the co-op’s targets.

In 2018 Arla launched an internal cost-saving programme called “Calcium” to deliver a run-rate of at least €400m (£335m) of savings by the end of 2020.

Arla Foods CEO Peder Tuborgh said: “Throughout 2019 we continued to build on the positive momentum that we have created in the business and Arla is a stronger company than we were a year ago. We have strengthened our competitiveness and beat our financial targets while continuing our transformation through Calcium.”

Lurpak, Puck and Castello were among the co-op’s leading brands. Lurpak revenue increased to €588m (£493m), compared to €561m (£470m) last year. Puck, the company’s leading brand in the Middle East and North Africa (MENA) grew revenue to €363m (£304m), compared to €352m (£295m) last year, driven by the processed and cream cheese business. Castello specialty cheese revenue stayed constant at €179m (£150m), despite a challenging and competitive environment across Europe and selected international markets.

Milk-based beverage brands also increased revenue by €20m (£16.78m) to €207m (£173m), mainly driven beverages sold through the Starbucks brand license in Europe, Middle East and Africa.

“Arla’s global brands continue to be at the heart of our business and in 2019 we have clearly strengthened consumer trust in our brands. We delivered a range of popular dairy products that capitalised on increasing consumer demand for healthy and sustainable food choices, which helped us exceed our expectations for branded growth in 2019,” said CFO Natalie Knight.

The co-op is concerned about the potential for tariffs and non-tariff barriers to be imposed which would add friction and cost to UK and EU trade. The UK business accounts for 22% of last year’s €10.5bn (£8.81bn) revenue for the global dairy co-operative.

Arla Foods UK managing director Ash Amirahmadi said: “2019 marks another year of progress on our branded agenda as we continued to improve our branded sales within butter, spreads, cheese and yogurt categories.

“As people’s eating habits change, they want different things from dairy, and our brands deliver to this. However, we are not immune from the profitability challenges facing the British liquid milk category, which remains a significant part of our business. Performance in this category held back our overall UK results in 2019.”

Arla offers one milk price across all of its farmer owners in all countries. At the end of the year the co-op looks at the final profit make decisions on how much to retain for reinvestment, and how much of the profit to give back to its farmer owners. This is known as the 13th payment and is usually confirmed in late February or March once it has been agreed with elected owners.

Going forward, Arla plans to build on the momentum created in 2019 by investing €619m in major projects to expand capacity in growth sectors such as milk powder for the international markets.

“As we come into the home stretch of our Good Growth 2020 strategy, it’s clear that it has been a very successful guide for us to grow our global and branded positions. Looking forward, we will continue to capitalise on these strengths, increase our innovation capabilities and most importantly, strengthen our commitment to sustainability to secure even more value for our farmer owners going forward,” concluded CEO Peder Tuborgh.

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