Scandinavian dairy cooperative Arla Foods has revealed plans to grow milk production volumes by 2.5bn kilograms during the next five years – representing an increase on current levels of nearly 18%.
Since 2007, Arla’s milk volume has grown from 8bn kilograms to 14bn kilograms through mergers and, since April 2015, through organic growth in the milk production of Arla’s farmer owners after the abolition of Europe-wide milk quotas.
The company has today set out plans to grow its business in eight global dairy categories and six market regions as part of its Strategy 2020. The blueprint for growth shows how Arla will prioritise the butter and spreads, speciality and spreadable cheeses, milk-based beverages, yogurt, mozzarella, ingredients, and milk and powder markets in the next five years.
Arla Foods CEO Peder Tuborgh said: “We are launching a new strategy. However it is not a radical change of direction for Arla. Over the past years we have prepared for this moment by expanding our size and our competencies. In Strategy 2020 we will focus even more on organic growth and growing our brands through innovation that focuses on what consumers and customers want and need. This will help us create the most profitable growth with our farmer owners’ milk.
“The global dairy industry has developed by a speed seldom seen before, with millions of consumers changing their daily habits and preferences. We have analysed consumer needs and trends across dairy categories worldwide and have matched this with our own biggest strengths. This has led us to pursue eight specific categories where we feel Arla can grow a leading position globally or regionally. Our strategic innovation and best resources will be poured into these categories.”
Arla will also concentrate on half a dozen strategic markets worldwide, having build a strong position in Northern Europe and the Middle East. They include emerging markets such as China, Russia and Nigeria – as well as developed economies like the US.
“We have identified the markets in which Arla has the biggest potential to grow a long-term profitable business for our farmer owners,” Tuborgh continued.
“We are stepping up our efforts in the United States and Nigeria, while continuing to build on our positions in Europe, the Middle East and China. We also remain hopeful that Russia will re-open for business, at which point it will still be a very attractive market for Arla.
“We are not pulling out of any markets that are not mentioned, but we will focus our innovation, investments and competences on those lead markets. Over the coming five years we expect about half of our growth to come from outside the EU as we grow market shares while the other half will come from within the EU as we grow in key categories and add value through innovation,” he adds.
Over the past five years, Arla has grown significantly in Europe with six mergers in Central Europe, the UK and Sweden – with subsequent years spent aligning the different companies into a single entity.
The abolition of European milk quotas, plans for which were first seen in 2009, came into effect in April and has allowed European dairy producers – including Arla – to increase the volume of milk that they produce.
At the time of the quotas being repealed, the European Dairy Association called the move “a big step” that had the potential to transform the European dairy industry and “provide a more positive outlook for the future” of the sector.
And this will allow Arla to improve its operation, as Tuborgh explained: “We are a different company to the one we once were. The last few years have prepared Arla to take the role of a global food company, and the benefits will be reaped over the coming years. Going forward, our entire supply chain will be more efficient as we will establish one European milk pool to ensure a more holistic use of our milk across the Arla group. You will see our branding and marketing becoming more global, improving the spend effectiveness, and you will see Arla driving more radical innovation across borders.”
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