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Arla Foods Steps Up Investments to Boost Profitability

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Arla Foods Steps Up Investments to Boost Profitability

Arla Foods Steps Up Investments to Boost Profitability
February 02
12:35 2017

In 2017, Arla Foods expects to invest €335 million in its production sites around the world to support its Strategy 2020 by moving more milk from bulk into branded retail sales and foodservice. The investment is nearly a 50% increase compared to last year’s plan and one of the highest ever single-year supply chain investment forecasts in the company’s history.

Most of the investments focus on production upgrades that will increase profitability of products sold on core markets like Germany, UK, Denmark, Sweden, the Netherlands and Finland as well as on production sites that supply high-quality dairy products to Arla’s emerging markets outside the EU.

“With these investments we continue our relentless pursuit of the goals in our Strategy 2020 to move more milk from bulk into brands and improve the profitability for our farmer-owners. You will see Arla take an even stronger position in the market as the innovative farmer-owned dairy company, providing great-tasting, natural dairy products that help people make good food choices. That is the main focus of these investments,” explains Peder Tuborgh, chief executive of Arla Foods.

Towards 2020, Arla expects 50 per cent of its growth to come from Europe with the other 50 per cent come from emerging markets outside Europe, where Arla’s strategic focus is especially on the regions Middle East and North Africa, China and Southeast Asia, Sub-Saharan Africa, and the US.

An important bet in Arla’s ‘Good Growth 2020’ strategy is to grow foodservice sales significantly by 2020. Consequently, around €18 million of this year’s investments will go into expanding and developing Arla’s production for foodservice customers.

One such investment is €13 million for Rødkærsbro dairy in Denmark, which is one of the leading mozzarella sites in the world. By investing in new world-class technology, Arla will be able to take the product quality to new heights as well as expand the site’s production of mozzarella for the international pizza industry.

A World Leader in Whey Protein and Lactose

The Denmark Protein site near Videbæk in Denmark which produces protein, lactose and other highly value-added whey-based ingredients for the global food industry, is the Arla site to receive the biggest total investment amount in 2017 with about €30.6 million to be spent on general upgrade and expansion of production facilities, including improvements of the sites protein and lactose processing.

“One of the ambitions in our Strategy 2020 is to be a global leader in natural whey ingredients for food producers in a range of categories – from bakery, beverages, dairy and ice cream to medical, infant and sports nutrition. The investment in our Denmark Protein site is key to meeting that ambition and it will help us build on an already strong and profitable part of Arla’s business,” says vice-CEO and executive vice president of Arla’s supply chain, Povl Krogsgaard.

Spreadable cheese and cream cheese is a product category of high strategic priority for Arla. The company aims to build on its already strong market positions in this category in Northern Europe, Middle East and the US. and is now ready to invest over €12 million in its key cream cheese dairy site in Holstebro in Denmark to introduce new, innovative packaging designs that will give products an edge on the supermarket shelf.

Investing in Better Energy Efficiency

Across all sites, €22 million will be spent on continued rationalization of production as part of Arla’s ongoing commitment to keeping operational cost low.

“Arla already runs one of the most efficient supply chains in our industry, and every year we find new ways to make our production sites even more efficient as we work to establish one European milk pool to ensure a more holistic use of our milk across the Arla group. Overall, we have set an ambitious cost improvement target of €400 million to be reached by the end of 2019. This is done to secure the highest value for our farmers’ milk while creating opportunities for their growth,” says Povl Krogsgaard.

The 2017 investment forecast also includes 150 projects at a total investment of about €5 million aimed at improving Arla’s energy efficiency.

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