Arla reports “complex” year19 Feb 2015
Arla has issued an update on how it sees the market and its performance ahead of publication of its annual results later this month. 2014 was a complex year, the company said. The farmer-owned company achieved one of its best results ever in a market impacted by volatility and international politics. A strong first half […]
2014 was a complex year, the company said. The farmer-owned company achieved one of its best results ever in a market impacted by volatility and international politics. A strong first half of the year produced record-high earnings, but the global market shifted in the second half, reducing the farmer milk price significantly.
Seldom has a business year been split in two so opposing halves, Arla noted. 2014 was a year that first saw strong economic tail winds in the global market that carried Arla into the summer with record-high milk prices for its cooperative farmers in Sweden, Denmark, Germany, the UK, Belgium, Luxembourg and the Netherlands.
Then things changed. The tail winds became head winds as global supplies rapidly outstripped demand, Chinese consumption ebbed off, and inventories were full. Finally, when Russia imposed a ban on dairy products from the EU, the headwinds grew in strength.
Summing up both halves, Arla says it came out of 2014 with an overall performance stronger than ever. The performance price, which indicates the value Arla has generated from each kilo of milk supplied by the owners, was 41.7 eurocent pr. kilo with a total volume of owner milk of 11.7 billion kilos in 2014 (compared to 41.0 eurocent pr. kilo with a total volume of owner milk of 9.5 billion kilos in 2013).
Arla’s profit in 2014 reached €0.3 billion, which corresponds to the set target of three per cent of the total revenue. The company’s Board of Representatives will decide how to appropriate profits in a meeting on February 25-26.
“In a rollercoaster year for the global dairy industry, Arla’s strong brands and focus on efficiency and cost control enabled us to make the most of the upturn and to be competitive through the downturn. The record-high performance price of 41.7 eurocent in 2014 confirms this, however it does not fully reflect the fact that the year ended with much lower milk prices than it began. Market conditions and the Russian embargo are making the financial situation difficult for our owners, but we have worked hard to minimise the effects by sticking to our strategy of creating growth outside Europe and strengthening our business across our European core markets,” said CEO of Arla Foods, Peder Tuborgh.
Arla posted its highest-ever revenue of €10.6 billio, with much of it attributable to organic growth of 6.7 per cent. Given the market situation, the strategic global brands – Arla, Lurpak and Castello – produced satisfactory results in 2014 with a total volume growth of 2.1 per cent.
“We are seeing growth for Arla’s strategic brands and our overall market shares in an otherwise stagnating or declining European dairy market. Throughout 2014 we have worked hard to move more milk into value-added brands, by enhancing our portfolio to our customers through further investment in innovation. Our grip on costs has never been more firm. Our owners gave us more milk in 2014, and we managed to absorb the extra volumes without increasing the share of sales to the less profitable commodity category, and we are ready to shift up to 500 million kilo of additional owners’ milk into value-added products in 2015,” said CFO Frederik Lotz.
While Arla continues to move more milk into branded products, the company says it is also working hard to move those branded products into new markets. Arla’s international operations and ingredients business had yet another strong year with growing opportunities.
“We saw 14 per cent growth in our international business despite the Russian embargo. There has been steady growth in China, and we have created growth of 20 per cent in the Middle East and Africa. In 2014 we have begun to enter new markets in Asia and Africa, and in 2015 we will continue to move into new markets where safe and high-quality dairy products are in growing demand,” said Lotz.
Although Denmark continues to be the country that supplies the most milk to Arla, the UK remains Arla’s biggest market by revenue followed by Sweden and Germany.
2014 showed that the global milk price is extremely volatile, the company said, and therefore Arla cannot announce any expectations for its revenue nor the performance price for 2015.
“The global dairy industry has never been as unpredictable as it is now, but we believe that our strategy is the right one to take us forward. We continue to rigidly streamline and control costs, while investing significant sums in marketing and new products. Arla’s ability to profitably handle larger milk volumes will define the success of the business in 2015. We will enhance the quality of our product range and our positions and stand strong when the market turns,” said Tuborgh.
The annual results were presented to Arla’s Board of Directors on Tuesday. They will now be submitted for approval to Arla’s Board of Representatives at a meeting in Nyborg, Denmark on February 25-26 2015, after which the Annual Report will be published.
One-fifth of Brazilian whey protein products mislabelled
12 Jul 2023
One fifth of whey protein products sold in Brazil are mislabelled, according to one small survey, as the Latin American trade association ALANUR calls on authorities to act against brands that inappropriately advertise the nutritional attributes of the...Read more
Peruvian healthy brand keeps prices low with artificial intelligence
12 May 2023
Nutri Co uses artificial intelligence (AI) to reduce product formulation time, allowing it to offer healthy products with local ingredients at a low cost, serving the price-sensitive Peruvian market.Read more
High-sugar Bournvita in the spotlight over misleading health claims
9 May 2023
Mondelēz-owned chocolate drink brand Bournvita has become embroiled in a legal spat with an Indian social media influencer who questioned the purported healthiness of the high-sugar product.Read more
Israel approves Remilk’s animal-free dairy
8 May 2023
The Israeli Ministry of Health has approved precision fermentation startup Remilk’s animal-free dairy whey protein, meaning its ingredients can now be marketed and sold in Israel.Read more
Strategic priorities: US dairy executives focus on growth, resilience, and sustainability in 2023
19 Apr 2023
In the face of current economic and geopolitical volatility, growth, resilience, and sustainability are the top three strategic priorities for US dairy leaders in 2023, according to a market report by US management consultancy McKinsey.Read more
Food production needs climate-conscious overhaul
18 Apr 2023
As climate change threatens global food security, urgent action is required to protect food production and secure future supply, say scientists – but is industry ready to act?Read more
Brick and mortar sales show strength for US sports nutrition and weight management products
12 Apr 2023
Sports nutrition and weight management products in the US are doing what no other category in the supplement space have been able to: brick-and-mortar sales aren’t just alive and kicking, they are beating e-commerce, according to a 2023 Nutrition Busin...Read more
Nestlé drops three plant-based brands in UK and Ireland
27 Mar 2023
Nestlé is to axe three plant-based brands, Wunda, Garden Gourmet, and Mezeast, in the UK and Ireland following disappointing sales that meant the brands were “not viable” in current market conditions.Read more
Swedish Food Agency updates food plate model to consider planetary health
21 Mar 2023
The Swedish Food Agency (SFA) has updated its national dietary recommendations to prioritise the health of the planet with an emphasis on plant-based alternatives to meat and dairy.Read more
‘Gruyere’ cheese can keep its name in the US, rules court
17 Mar 2023
A US court recently ruled in favour of American dairy manufacturers by allowing cheese products to use the name “gruyere” even if it is not made in the Gruyère region of Switzerland and France.Read more