The head of Arla in the UK said the co-operative is responding to changing perceptions of dairy as he announced the biggest nationwide investment in its processing capabilities in a decade.
Some £72m of Arla’s new £460m global investment as part of its 2020 growth strategy will be used to drive efficiencies across its UK sites.
Two Yorkshire dairy sites are in line to benefit, Arla’s plant at Stourton in Leeds and at Settle in the Yorkshire Dales.
Speaking to Country Week, Tomas Pietrangeli, managing director of Arla Foods UK, said product development, in response to consumer trends, was central to Arla’s strategy amid the latest round of investment.
He said: “Our role is to develop more modern products to drive different markets. Our protein products are a good example and they can play a very significant role. And one of the big investments we have announced is we will be producing lactose free products in the UK.”
Vegan activists have increasingly used social media to spread anti-dairy messages and York-based dairy farmer Paul Tompkins appeared on the BBC’s Victoria Derbyshire show this week for a debate with an activist. Despite the growing profile of veganism, Mr Pietrangeli emphasised the scale of the dairy market in the UK remained huge.
“It’s worth noting that milk sales grew last year even though a lot of people are quoting decline in dairy consumption,” he said. “Still, in the UK, 95 percent of households in the UK have dairy products in their fridge.”
The focus of Arla’s new investment is on upgrading its facilities and almost half of the £72m committed to its UK operations will be used to develop its carbon net zero site at Aylesbury. The remaining £32.5m will be split between its plants in Oswestry, Melton Mowbray, Llandyrnog, Malpas, Oakthorpe and Trevarrian, plus the two in Yorkshire.
At Stourton, £1.3m will be spent to upgrade one of the production lines for four-pint cartons of milk and “a few other smaller products”, and another £300,000 will cover “general upgrades” to the facility at Settle.
Mr Pietrangeli said: “We are very pleased to be making this huge commitment to the UK. It is the biggest investment we have made in the last ten years with the exception of the opening of our Aylesbury site.
“We are basically upgrading ten of our UK sites, some more than others, but historically we have invested a lot in them - more than £5m in Stourton alone.”
Mr Pietrangeli said their decision showed that uncertainty created by Brexit was not undermining Arla’s growth ambitions.
“I think the investment we have made is done independently of whatever happens with Brexit,” he said.
“We have a very big operation in the UK, we are growing our branded sales which is an important part of our 2020 strategy and there are a lot of things going for us here, so we have a long-term strategy in the UK.
“Of course there are uncertainties about Brexit. We have done our own preparing and scenario planning. The vast majority of our products in the UK come from British milk, from UK farms, so we feel we are well placed.”
Its UK investment also includes “non-site specific investments which will enable Arla continue to drive growth for the farmers which own it and capitalise on increasing demand for dairy”, the company said.
The co-operative sources milk from around 200 farmers in Yorkshire. It employs 460 people at Stourton, Arla’s second biggest milk site in the country, where it makes products including its Fresh Milk, Cravendale, BoB, Protein, cream, custard, alcohol cream, alcohol sauce and cottage cheese ranges.
The investment in Arla’s Settle site comes after a previous spend of more than £750,000 last year and in excess of £1m in 2016. The money has been used to make “a wide range of process and production improvements” as well as utilities, effluent, general fabric and infrastructure upgrades.
Around 100 people work at the Dales site which produces UHT milk for UK retailers and Arla label in whole, semi and skimmed milks for the UK market. It also provides products for export to China, the Middle East and the Falklands.
Mr Pietrangeli said the investment will not lead to Arla looking for new suppliers in Yorkshire.
“We are not recruiting but it is something we look at consistently. We have just, in 2017, won the full milk supply of Morrisons own label milk and we are seeing how we deal with that. We also recently announced that we will be supplying 83 percent of Aldi own label milk so we will evaluate the need for new farmers in the future.”
Dairy farmer, Mr Tompkins, who is a member of the dairy board at the National Farmers’ Union, said: “It is positive and reassuring to see Arla committing to dairy processing in the UK. Farmers in the UK are poised to make the most of future opportunities that Brexit may present and investment in the UK’s processing capabilities is paramount to help us achieve them.”