Manufacturing & Supply Chain

Scandinavian dairy co-operative Arla Foods has reported its highest Performance Price ever in its history and an improved balance sheet for 2013. Following the mergers in 2012, Arla’s global business benefited from a strong base in its core markets in Europe in 2013 as well as a continued significant increase in sales within its growth markets outside the EU. Globally, the demand for dairy products exceeded the supply of milk, which increased the value of milk and the overall price level of dairy products.

Arla’s total revenue rose by 16.5% to DKr73.6 billion (Eur9.86 billion). The company’s net profit was the planned 3% of the revenue, equal to DKr2.2 billion (compared to DKr1.9 billion in 2012).

The most defining key figure in any Arla financial report is the Performance Price, which indicates how much value Arla has been able to generate from each kilo of milk supplied to the company by the co-operative owners in Sweden, Denmark, Germany, UK, Belgium and Luxembourg throughout the year. The 2013 Performance Price amounts to DKr3.05 pr. kilo with a total volume of owner milk of 9.5 billion kilos (compared to DKr2.71 pr. kilo with a total volume of owner milk of DKr7.5 billion in 2012).

Peder Tuborgh, chief executive of Arla Foods.

“Milk has become a more valuable commodity globally, and that naturally has a positive effect on our results. With this tailwind we have driven our business forward in 2013 – with a strong efficient base in Europe, promising growth rates in Russia, China, the Middle East and Africa as well as a very profitable ingredients business in Arla Foods Ingredients. Our main focus is to create the best possible milk price for our owners, and the 2013 results confirm that we have the right strategy to achieve this,” says Peder Tuborgh, chief executive of Arla Foods.

“The Performance Price is up by 12.5 per cent in 2013, and that has been much needed among our farmers. The higher milk price strengthens the economy on the farms. The milk production is rising, and the relationship between a farmer’s profits and costs has been improved. This development was necessary and must be carried on in 2014,” says Arla Foods’ board of directors chairman, Ake Hantoft.

Measured by revenue the UK remains Arla’s biggest market followed by Sweden and Germany. Although Denmark is the country that supplies the most milk to Arla, Denmark is now Arla’s fourth biggest market.

“In Europe our focus has been on integrating the companies that we merged with in 2012, and that has already made us more efficient and given us a more complete product portfolio. European consumers are still among the most price-focused in the world, and that means tough competition between discount products and quality brands. Our organic growth on our European core markets in 2013 reached 3.5 per cent, which is reasonable given the pressure from discount,” says Arla Foods’ chief financial officer, Frederik Lotz.

“Our three global brands – Arla®, Castello® and Lurpak® – have been pressed by discount trends and private labels in 2013. All three brands are performing well on the growth markets outside the EU, but the volumes in Europe has not grown the way we wanted them to. In 2014 we will continue to focus on creating global growth with all three brands,” continues Frederik Lotz.