Arla Foods claims robust performance despite milk price woes

 
Kasmira Jefford
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Morning Milking At Newlands Farm Bozeat
Arla is countering weak demand in some its major markets by expanding into new markets and launching new products (Source: Getty)

Arla Foods said full-year revenue declined by 3.3 per cent following a tough year for the industry, as increased milk supply in Europe combined with China’s slowdown in demand sent global prices tumbling.

The Danish-based dairy giant behind brands including Lurpak, Castello and Arla, said total revenue dropped to €10.3bn (£3.73bn) in 2015, which Arla described as "robust" given the difficult market conditions and "fully in-line with the company's expectations". Net profit dropped to €295m, compared to €300m last year.

Its UK business grew revenue by 3.6 per cent to €2.9bn thanks to record sales of butter and spreads – up 4.6 per cent. Arla's milk brands such as Cravendale rose by 2.1 per while its Lactofree range for people with an intolerance to lactose enjoyed a double digit jump in sales, up 23 per cent.

Dairy producers have come under heavy pressure due to a glut in domestic milk supply combined with falling demand from China and Russia’s ban on EU dairy products, which in turn has led to falling prices.

Arla has been trying to counter that by shifting more of its milk into branded dairy products and food services, launching new products such as its Iceland-style yoghurt brand Arla Skyr.

Despite a lack of growth in many of its major markets, it has continued to grow its milk volumes by driving sales in these new areas, with volumes up by approximately 622m kilos in 2015 to 14.19bn kilos.

In December, the company also set out a new five-year plan, called Strategy 2020, to grow its business in eight global dairy categories and six markets, which comprise of Europe, the Middle East, China, Russia, Nigeria and the US.

“We are working fiercely to expand our branded business in growth regions outside the EU but also within our European lead markets," chief executive, Peder Tuborgh, said.

"We have gained market shares in most of our markets although the competition is fierce, with everyone competing for their share of the market while global prices are under pressure. We are confident that Arla has the right strategy to take the company and its owners forward as we focus on organic growth within our existing branded business,” he said.

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