Arla Foods Group has announced strong global growth in 2019 driven by branded products, but a weakened exchange rate saw UK revenue dip.
UK revenue edged up from €2.27bn in 2018 to €2.28bn – but the weakened exchange rate converted this to £1.95bn, down from £2.01bn in 2018.
Group revenue increased by €0.1bn to €10.5bn, driven largely by branded products appealing to changing consumer demands.
The co-operative said the positive year globally helped it maintain a steady milk price to its 9,900 farmer-owners across seven European countries, with 2,400 members in the UK.
Arla has gone 14 months without a change to its member price, with the last change being a reduction of 1.33ppl on 1st of January 2019. Its conventional manufacturing standard litre price is 30.04ppl, and its standard liquid litre is 28.89ppl.
“As peoples eating habits change, they want different things from dairy, and our brands deliver to this,” said Arla Foods UK managing director, Ash Amirahmadi.
“However, we are not immune from the profitability challenges facing the British liquid milk category, which remains a significant part of our business. Performance in this category held back our overall UK results in 2019.”
Changing consumer habits
Global growth was driven mainly by a 5.1% volume increase in branded sales, with revenue up from €2,875m in 2018 to €3,033m.
This was driven by launches of new products in Lactofree and organic ranges, the introduction of flexitarian options, and the rapid growth of Skyr in core European markets.
Consumers also showed a resurgence in demand for butter, with Lurpak® performing well, while milk based drinks increased revenue by €20m, mainly driven by Starbucks, and sold in Europe, the Middle East and Africa.
UK growth came predominantly across cheese, yogurt, butter and spreads categories as well as the chilled milk-based beverages sold through Starbucks. Revenue for Arla’s foodservice brand Pro® leapt 45%.
Savings and investment
Arla’s ‘Calcium’ plan to save €400m by 2021, saw €110m savings made, taking accumulated savings since 2018 to €224m.
As part of its Good Growth 2020 strategy, Arla plans to invest a record €619m in projects to expand capacity in growth sectors such as milk powder for the international markets.
Area said Brexit “continues to be a risk”, with negotiations on the future UK/EU trading relationship taking place this year.
“There is the potential for tariffs and non-tariff barriers to be imposed which would add friction and cost to UK and EU trade. Arla is advocating for as close a trading relationship as possible to minimise these risks.”