Dairy: Arla revenue up in the UK but headwinds expected as milk supply continues to flow

Arla Foods, Stourton, Leeds.
Arla Foods, Stourton, Leeds.
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Farmer-owned dairy company Arla Foods said revenue in the UK increased in 2015 but warned that its UK business wasn’t immune to headwinds facing the broader business including the increasing supply of milk.

Overall revenue in Arla’s UK business increased from £2.19bn in 2014 to £2.27bn in 2015 but the UK business isn’t immune to the challenges facing the broader industry including the increasing supply of milk.

Arla Foods UK saw record sales in butter and spreads with Lurpak and Anchor up 4.6 per cent. It also reported strong liquid milk category performance with Cravendale up 2.1 per cent.

The company also said it is launching a new health strategy in the coming months to take advantage of the growing consumer demand for healthier products.

While Arla delivered a strong cost control programme and increased its competitiveness in 2015, it said improved efficiencies will continue throughout 2016 to maintain a strong performance in what it describes as a challenging market.

Peter Giørtz-Carlsen, executive vice president at Arla Foods UK, said: “A relentless focus on supporting our farmer owners, product innovation and continually delivering efficiencies and cost savings will ensure that we stay ahead of the game.

“Our performance success means that we will continue to invest in branded growth, and increase our marketing spend as well as our presence in the yogurt category in 2016.

“To further underpin our position as industry leader, and take advantage of the increasing supply of milk available, we will soon be making an announcement in the UK as part of the business’ Good Growth 2020 strategy, with the aim of supporting the growth of dairy categories in the UK as well as the development of Arla into a top ten consumer grocery brand.”

Arla Group’s profit was as expected lower in 2015. Åke Hantoft, chairman of Arla Foods, said: “Normally our profit target is 3 per cent of our revenue, but in August last year the board of directors agreed to reduce the profit target from 3 per cent to the range 2.7 to 3.0 per cent of the company’s revenue.

“This reduction was made in favour of the prepaid milk price to support our farmer-owners in their very difficult financial situation, which is caused by the global decline in milk prices.”

Arla Foods UK is the largest dairy company in the country and has its head office in Leeds. Last year it said it planned on cutting around 100 jobs, with majority of the cuts coming at its head office.