Tag Archive | "Arla Foods"

Arla Foods promotes whey protein ingredients


wArla Foods Ingredients is to launch a new drive to raise awareness of the ways in which whey protein ingredients can enable dairy companies to maximise output, increase profits and significantly cut waste.

The campaign, called Maximum Yield, will highlight how adding whey protein to an existing production process with only small or no processing adjustments can significantly increase a dairy’s efficiency and boost its sustainability credentials at a stroke, the company said.

The campaign is focusing on two fronts : the elimination of unwanted by-products and the use of by-products as a raw material.

Brian Jørgensen, business unit director for Arla Foods Ingredients, said: “Maximum Yield is about emphasising the benefits of whey protein ingredients in terms of either making sure 100% of the milk processed ends up in the finished product, or alternatively treating any by-products created during production as a valuable raw material. In both cases, dairies will be maximising their productivity and reducing the burden they place on the environment.

“Whether you’re a dairy looking to eliminate by-products like acid whey, or one that wants to turn it into a product you can sell, our high-yield whey protein solutions will help you achieve your aims, increase profitability and reduce waste. They offer a straightforward and cost-effective way to use 100% of your milk, to optimise production and make the most of the resources at your disposal – with nothing going to spare.”

Arla Foods Ingredients is a global leader in natural whey ingredients for products in a range of categories – from bakery, beverages, dairy and ice cream to clinical, infant and sports nutrition.

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Arla discloses its Strategy 2020


Arla has more raw milk in its care than ever before and more expected over the next five years. This provides the business with opportunities for global growth to create value for its 12,700 farmer owners.

Unveiling its new Strategy 2020, Arla is setting out to grow its business in eight global dairy categories and six market regions around the world, as the company moves towards 2020 as one effective and unified cooperative.

Since 2007 Arla’s milk volume has grown from eight billion kilos to 14 billion kilos through mergers and, since April 2015, through organic growth in the milk production of Arla’s farmer owners as EU milk quotas no longer exist. It is anticipated that Arla’s farmers will grow their milk production by another 2.5 billion kilos by 2020, giving Arla more growth opportunities than ever before.

In the new group strategy Good Growth 2020, Arla’s board of directors and executive management is laying out the direction for Arla’s business in the coming five years to create maximum value for the increased volume of milk by excelling in eight dairy categories; by focusing on six regions; and by winning as one efficient Arla.

“We are launching a new strategy,” said CEO of Arla Foods, Peder Tuborgh. “However it is not a radical change of direction for Arla. Over the past years we have prepared for this moment by expanding our size and our competencies. In Strategy 2020 we will focus even more on organic growth and growing our brands through innovation that focuses on what consumers and customers want and need. This will help us create the most profitable growth with our farmer owners’ milk.”

Consumers around the world are looking for ways to make their everyday lives healthier, Arla believes. The company has now identified eight product categories that will be the central focus for its efforts to shape the dairy market by offering new products with natural ingredients, great taste and good nutrients that make it easier to live a healthy life.

“The global dairy industry has developed by a speed seldom seen before, with millions of consumers changing their daily habits and preferences,” said Tuborgh. “We have analysed consumer needs and trends across dairy categories worldwide and have matched this with our own biggest strengths. This has led us to pursue eight specific categories where we feel Arla can grow a leading position globally or regionally. Our strategic innovation and best resources will be poured into these categories.”

The eight prioritised product categories are:

  • Butter and spreads: Be global leader in butter and spreads with world class products made from natural ingredients
  • Spreadable Cheese:Lead in cream cheese made from natural ingredients and high quality processed cream cheese
  • Speciality Cheese: Be leading player in speciality cheese with creatively crafted products and concepts
  • Milk-based beverages:Shape market for nutritious milk-based beverages made from natural ingredients for people on the go
  • Yogurt: Innovate to build a strong ‘natural goodness’ position for yogurts
  • Milk and powder: Lead and shape the milk and powder market with nutritious value-added and cost-competitive products.
  • Mozzarella: Build global mozzarella position with high quality and cost-competitive products
  • Ingredients: Be the global leader in value-added whey

Arla said it will pursue growth in these eight categories primarily through its three global brands of Arla (natural goodness), Lurpak (good food deserves Lurpak) and Castello (creatively crafted).

Arla Foods is an international cooperative based in Århus, Denmark, and was formed in 2000 as the result of a merger between the Swedish dairy cooperative Arla and the Danish dairy company MD Foods. The company employs over 18,100 people and is the seventh largest dairy company in the world measured by turnover.

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Snacks and the City: New Health to-Go concept offers hungry urbanites a convenient fix


Arla Foods Ingredients has launched Health to-Go, an innovative protein-rich ingredient solution that can be used to create convenient snack products that will appeal to the growing number of people living in urban areas.

By 2050, it is forecast that 66% of people globally will live in cities, compared with 54% now[1]. This is likely to mean more people will be leading busy lives with less time for sit-down meals – creating increased demand for convenient and satisfying solutions that can be eaten on the go.

Reflecting this trend, convenience stores worldwide have generated revenues of US$543 billion so far this year, and are set to record a compound annual growth rate of 4.6% between now and 2020[2]. Sales are being driven by rocketing demand for ‘grab-and-go’ products that are quick and easy to purchase and consume while on the move.

The new Health to-Go solution is a combination of Nutrilac® PB-8420 proteins and Capolac® calcium from milk. It is suitable for use in snacks, juices and milk-based drinks. To illustrate how it can be used in snack applications, Arla Foods Ingredients has created Protein & Calcium Bites. Set to be introduced at Food Ingredients Europe 2015 (Stand 6F9), the Bites are tastier than standard protein bars and offer longer-lasting softness. They are rich in dairy proteins that have excellent amino acid and DIAAS profiles.

Troels Laursen, Head of Health & Performance Nutrition at Arla Foods Ingredients, said: “Already, convenience is an unstoppable mega-trend in the food industry, and in the past few years has been communicated on-pack more frequently than any other benefit. In fact, so far this year, 82% of newly launched food and beverage products have featured a convenience-related claim, according to Innova.”

He continued: “We expect this trend to carry on growing as more consumers migrate to towns and cities and their lifestyles become more frantic and stressful. Health to-Go, as illustrated by the Protein & Calcium Bites, taps into their needs now and in the future by providing the potential for creating great-tasting and healthy snacks that can replace a full meal, or keep them going until they eventually get the chance to sit down and eat one.”

It is estimated that snacks currently provide nearly a quarter of our daily energy intake, and 42% of our daily sugar intake – but a low percentage of the key nutrients we need[3]. High sugar snacks also tend to be less satiating, resulting in constant hunger cravings. Arla Foods Ingredients’ Health to-Go concept addresses this problem by offering an alternative to the many unhealthy snacks on offer, which can contribute to excess energy intake, leading to obesity and diseases such as type 2 diabetes.

Snacks high in whey protein deliver excellent satiety and can have a favourable effect on blood glucose levels, weight and body composition. Meanwhile, in addition to supporting bone health, calcium has been shown to positively influence fat loss by reducing the absorption of dietary fat during a meal.

After convenience, health remains the second-most frequently communicated benefit on-pack, featuring on 46% of all new food and beverage products launched globally in 2015, according to Innova.

Troels added: “Consumers are beginning to understand that healthy, nutrient-dense snacks are a better choice than sugary, fatty products that offer little more than empty calories. However, it’s still true that the number of unhealthy snacks available is enormous, so it can be hard to find better-for-you options. Our Health to-Go solution gives snack food manufacturers a way to profit from this by creating products that are healthy alternatives and will appeal to busy urban consumers seeking convenient and nutritious products.”

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Steady First Half Performance by Arla Foods


Arla Foods has increased revenue by 12% to DKr29.9 billion (Eur4.0 billion) in the first half, resulting from a combination of organic growth within core and growth markets and the realisation of merger and acquisition benefits, including those in Sweden and Germany. Major agreements have paved the way for significant opportunities for Arla in Germany, the UK and China, and previous mergers and acquisitions have delivered efficiencies across the organisation. However, these achievements are against a background of a large increase in global milk production putting significant pressure on earnings and consequently on the milk price.

Arla’s key financial measurement is the milk price it pays to its owners and this is under pressure. While revenue is in line with expectations, Arla earnings for the first half of 2012 are below last year’s at DKr2.64 per kg of milk compared to DKr2.74 per kg in 2011.

“We anticipate that we will be able to deliver the three per cent increase in revenue in our annual results as planned, which equates to DKr1.8 billion. However, the milk price currently paid to our owners is not as high as we would like. The world commodity market has proved more unfavourable than foreseen, primarily due to an unexpected increase in world milk production. This is putting pressure on prices and therefore on our earnings from commodity trading and global E-auction sales and affects 25% of our milk,” explains Frederik Lotz, chief financial officer of Arla Foods.

Although there is a general trend, especially among European consumers in Arla’s core markets, to trade down to less expensive products, Arla’s three global brands – Arla, Castello and Lurpak – are all in growth. For example,. globally sales of Lurpak products continue to grow and the brand grew by 13% in the first half of 2012.

Overall, despite tough conditions within Arla’s biggest markets, the company has achieved 2.8% organic revenue growth. In particular, Arla’s strategic growth markets have seen significant sales increases . In the Middle East and North African region, revenue has increased by 20%, while inRussia, growth is 40%. There is also a double-figure growth rate for Arla’s subsidiary, Arla Foods Ingredients (AFI), which produces whey-based ingredients for the food industry. AFI increased its revenue by 14%.

“We are seeing clear, positive developments in profitability on our growth markets. We will maintain a strong focus on our core markets in Europe and in the future will become more active outsideEurope, moving into markets where there is growth and a rapidly growing demand for dairy products. Within our core markets we are looking forward to the new opportunities and sales channels which our impending mergers in Germany and the UK are expected to create,” says Peder Tuborgh, chief executive of Arla Foods. “We have created important top-line growth in the first half year, which in coming years will create new opportunities for us to grow Arla’s bottom-line.”

For the full 12 months, Arla expects to deliver a revenue of DKr60 billion, a figure which excludes the effects of the potential mergers. If the mergers are approved and the effect of them is included, Arla’s revenue is expected to reach DKr62 billion in 2012 (total revenue in 2011 was DKr55 billion).

Arla expects that prices on the global commodity market will improve significantly in the second half of the year and therefore, so will Arla earnings. Furthermore, a series of efficiency improvements implemented during the first half of the year will result in a decrease in the group’s costs from the end of 2012 and into 2013. The company therefore expects to deliver its forecasted three per cent annual increase in revenue, which in 2012 will equate to DKr1.8 billion.

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Arla’s Proposed German and UK Dairy Mergers Approved


Arla Foods’ board of representatives has approved the dairy group’s proposed mergers with the German Milch-Union Hocheifel and British Milk Link. The board of representatives voted in favour of the two mergers by a large majority as did the members of the MUH and Milk Link co-operatives.

Peder Tuborgh, chief executive of Arla Foods, comments: “This is an important decision and fundamentally strengthens Arla. The circle of ownership is being expanded with more owners and with owners in the UK, who all share our vision of the future – to be a strong European dairy company that operates in a global market.”

The two mergers will now be examined by the relevant regulatory authorities. Arla Foods expects to be able to carry out the mergers during the autumn of 2012.

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Arla Foods Secures Major Chinese Infant Nutrition Deal


Biostime International Holdings, a premium provider of high-end pediatric nutritional and baby care products in China, has signed a 10-year financing and supply agreement with Arla Foods. The agreement is aimed at securing Biostime sufficient production capacity at Arinco, Arla’s largest infant formula production facility based in Denmark equipped with full formula spray-dry technology and using Arla’s own Danish milk.

Both companies have entered into a commercial agreement, qualifying Arla as the third European supplier of Biostime in the field of infant formulas. In order to strengthen their cooperation and secure additional capacity at Arinco, both parties have signed a 10-year agreement aiming at co-financing an investment of a possible upgrade and extension of Arinco’s capacity and secure a yearly capacity of 20,000 tons of infant formula powders dedicated to Biostime by 2015.

Jens Jorgen Hjortshoj, vice president of B-to-B Nutrition Business Unit in Arla Foods, comments: “This new co-operation will have a positive contribution into Arla’s business by enabling our company to produce high-quality dairy products with superior added value. This partnership with Biostime, a leading player inChina’s premium infant nutrition market, clearly reinforces our confidence in the long-term development of the Chinese premium infant formula market.”

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Arla Foods to Merge With Milk Link and MUH


Arla Foods is planning two mergers in the British and German marketswhich will immediately increase its revenue by DKr9 billion (Eur1.2 billion) per year and strengthen its position as one of Europe’s leading dairy groups.

Arla Foods is seeking to complete two major mergers – with Germany’s eighth largest dairy, the co-operative Milch-Union Hocheifel (MUH), which has owners in Germany, Belgium and Luxembourg, and with the UK’s fourth largest dairy, the co-operative Milk Link.

As a result of the mergers, Arla will have, for the first time, co-operative owners in the UK, and in Germany the group of owners will be significantly expanded.

The owner representatives in Arla Foods and MUH and the members of Milk Link will make a decision on whether to merge on June 26th and the mergers will require clearance from the regulatory authorities. If the mergers are finalised and approved, Arla will be represented by owners in its four largest markets, the UK, Sweden, Denmark andGermany, and also in Belgium and Luxembourg.

The planned mergers are in line with Arla’s Strategy 2015, the key objective of which is to improve returns for its owners by, among other things, enhancing their positions in the core markets of the UK and Germany.

“Both Milk Link and Milch-Union Hocheifel are strong, well run dairy groups, which, with their product portfolios and production systems, will strengthen our business in both countries,” says Peder Tuborgh, chief executive of Arla Foods. ”In each of the three companies, the aim is to create value for our farmer owners in the form of a strong milk price. This will also be the case going forward, and our ability to deliver good results will be strengthened if these plans are realised.”

The mergers will bring Arla a significant step closer to a number of the main objectives in the group’s Strategy 2015: Arla will be the UK’s largest dairy company and will rank third in Germany; these are both stipulated objectives for Arla by 2015.

Another Arla objective is to achieve a revenue of DKr75 billion by 2015. The two companies, which will become an integral part of Arla Foods if the mergers take place, have combined revenues of approximately DKr9 billion. In 2011, Arla’s revenue amounted to DKr55 billion. Together, the companies are expected to generate revenues of DKr70 billion by 2013.

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Arla Foods Restructures to Cut Costs


Arla Foods has announced measures, including the shedding of 250 jobs, aimed at reducing its annual costs by DKr500 million (Eur67 million) in order to remain internationally competitive. The international dairy group is being organised in a more efficient way to ensure a competitive milk price to co-operative owners and to prepare the organisation for further growth.

The changes aim to reduce the complexity in the organisation, ensuring clear roles and responsibilities and leveraging synergies in scale. Consequently, Arla will discontinue approximately 250 administrative positions globally before the end of 2012, and approximately 150 administrative positions will be restructured within the organisation. Simultaneously, Arla will reduce spending on market research and analysis activities as well as procurement costs on packaging and other materials. In total, the changes are expected to reduce Arla’s annual cost by DKr500 million going forward.

Peder Tuborgh, chief executive of Arla Foods.

“Our turnover is growing, and that growth will continue. We have a responsibility towards all of our co-operative owners and other dairy farmers, who invest their milk and their money in Arla, to make sure that our turnover grows significantly faster than our cost. Our international competitors are able to turn ideas into action quicker than before and, therefore, Arla needs a more simple and structured way of working,” explains Peder Tuborgh, chief executive of Arla Foods.

Arla’s ambition is to continuously play a leading role in the current consolidation of the European dairy industry. A leading position requires that Arla is able to attract and retain raw milk in sufficient volumes, and a prerequisite for this is to deliver a competitive milk price to its co-operative owners.

“It’s a long time since Arla has had the opportunity to really exploit the synergies that always arise when two large companies, each with their integrated production and administration, join forces. Even the most recent mergers with the Swedish Milko and the German Hansa have not been large enough to trigger radical efficiency measures throughout the company. Therefore, this project aims to ensure that Arla stays competitive by reducing costs and complexity of our business model – and thereby prepare ourselves for further growth,” says Peder Tuborgh.

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Arla Foods Increases Revenue and Earnings


Despite continuing weak consumer confidence in Europe, where 80% of its business is based, Arla Foods achieved double digit growth in both revenue and earnings in 2011. Revenue rose by 12% to almost DKr55 billion (Eur7.4 billion) and Arla Foods increased the earnings for its 8,200 co-operative owners in Denmark, Sweden and Germanyby 11%, paying out a performance price of DKr2.80 for each kilogramme of milk supplied. During 2011, Arla also paid DKr1.6 billion more to the co-operative owners than in the previous year. The retained profit of DKr1.31 billion was up from DKr1.27 billion in 2010.

”These are strong results in a difficult time. Primarily because we have improved earnings for our owners to a level that is almost on par with the best we’ve ever delivered,” says Peder Tuborgh, chief executive of Arla Foods. “During an economic crisis, more consumers choose to buy discount products and fewer branded products. This has an effect on Arla’s earnings. But at the same time, we’re seeing a rising demand in markets outside Europe, which will offset the flattening growth in Europe.”

Arla’s brands helped it to grow outside Europe. Half of Arla’s revenue growth was through organic growth, in part driven by Arla’s three global brands – Arla, Lurpak and Castello. The Arla brand showed a significant growth of 8% in 2011, resulting in global revenues of DKr20.6 billion

Arla Foods has enjoyed success in new markets, particularly in MENA (Middle East and North Africa) and Russia. It also made a major breakthrough in Germany during the year following the merger with Hansa-Milch and the acquisition of Allgäuland-Kasereien.

Peder Tuborgh, chief executive of Arla Foods.

Arla Foods Ingredients (AFI), which is responsible for Arla’s global production of whey, whey proteins and ingredients for the food industry, had a strong year and was one of Arla’s most profitable business areas. Despite the rise in raw material prices, AFI succeeded in launching new products and increasing revenues by 25%.

Although Arla Foods expects to maintain growth in 2012, the year ahead will be challenging. “While 2011 was a good year for Arla, the last quarter showed slight pressure on performance, reflecting a deteriorating business environment in Europe, which has continued into 2012. We expect significant revenue growth and for profits to be on par with 2011 albeit with fluctuations in the milk price for our co-operative owners over the year,” says Peder Tuborgh.

He continues: “To secure the top-line expansion effectively converts to the bottom-line, we’re working on all fronts to improve our internal efficiency. For the group as a whole, we’re focusing on growing revenues considerably faster than costs. We’re making progress in this direction, but there’s still some way to go. We’re focusing, therefore, on creating a more structured and less complex way of working, and we expect to launch some specific initiatives in 2012.”

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Arla Foods Moves into Cheese Production in Russia


Arla Foods has taken another significant strategic step into Russia by agreeing a joint venture for the production of yellow cheese with Molvest Group, the country’s third largest dairy company. The agreement is in keeping with Arla Foods’ ambitions to become one of Russia’s leading dairy companies within yellow cheese.

Following several years of growing exports to the Russian market, Arla Foods now intends to set up local production in Russia for the first time. Production will be centered on the city of Kalacheevsky in south-west Russia, where Arla Foods’ Russian subsidiary – Arla Foods Artis – in partnership with the Molvest Group will be converting one of  Molvest’s existing dairies to yellow cheese production. The two parties have agreed on terms for joint production at the dairy. The terms and conditions are subject to approval from the Russian Federal Antimonopoly Service (FAS).

Peder Tuborgh, chief executive of Arla Foods.

Molvest will be responsible for collecting the milk from farms in the area as well as weighing-in and processing the milk at the dairy. Arla Foods will subsequently buy the milk and with its experience and expertise from its Scandinavian operations will be responsible for the production of yellow cheese at the dairy. The finished products will be distributed and sold by Arla Foods. For Arla Food, the conversion of the dairy represents an investment of DKr25 million (Eur3.4 million).

Arla Foods and Molvest anticipate joint production will begin in early 2013. Initially, the aim is to produce approximately 6,000 tons in 2014, with a subsequent annual volume increase of 10%.

”As Russia is one of our strategic growth markets this agreement is important because it provides us with the opportunity to combine our export business to Russia with local production,” says Peder Tuborgh, chief executive of Arla Foods. “This is unlikely to be our final expansion into the Russian market but this agreement alone is expected to double our turnover in Russia before the end of 2015.” Arla Foods’ Russian business grew by about 30% in 2011 to DKr500 million – growth that was largely driven by exports of Lurpak butter, Castello speciality cheese and cream cheese under the Arla Natura brand.

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Arla Foods to Expand in Scotland


Arla Foods is expanding its business in Scotland, and plans to create a new depot in Bellshill, Glasgow, to handle additional milk and product volumes. Arla is aiming to increase production capacity by almost 40% at its Lockerbie dairy in Scotland, which will enable the company to meet growing demand from customers. The new depot will have the capacity to deliver both fresh milk products direct to store, and also other products for own and third party customers through Arla’s pallet network.

Paul Lloyd, vice president for operations at Arla Foods UK, comments: “The proposal is in line with Arla’s growth strategy, and we have identified Scotland as an opportunity for further growth. The new Central Belt depot will establish a strong platform for future fresh milk deliveries in Scotland.”

He adds: “The move will also support our sustainability agenda, as our product will be closer to the customer, reducing the number of road miles.” It is expected that the proposals will be implemented in March 2012. Once up and running, Arla plans to work with a third party to manage the Central Belt depot.

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Arla Foods Joins Global Dairy Trade Auction


Arla Foods, the Danish, Swedish and German dairy co-operative, will begin offering dairy products on GlobalDairyTrade from April 3rd 2012. With Arla Foods’ participation as a seller on GlobalDairyTrade, access to bidders around the world has been expanded, and a tool to improve the challenges of price risk management in a volatile dairy sector becomes available for more market participants.

 

Acting in a global market, and recognising the need to achieve prices that will ensure that Arla Foods pays a competitive milk price to its co-operative owners, joining an online dairy commodity trading platform like GlobalDairyTrade marks the opening up to a so far unused source of potential export growth.

 

Peder Tuborgh, chief executive of Arla Foods.

“We believe that the growth potential on the European markets will continue to be under pressure in the years to come, and we are therefore increasing our focus on the growing markets in the Middle East, Africa and Asia. A part of our strategy is to conduct an efficient trading business on those markets,” explains Peder Tuborgh, chief executive of Arla Foods. “The GlobalDairyTrade auction platform is one of the tools we intend to use to reach and service new and present customers in a cost effective way. We believe that customers will appreciate the opportunity to source Arla Foods products on the GDT auction platform.”

 

GlobalDairyTrade was established as a single-seller auction in July 2008, and sold whole milk powder once a month. In October 2011, DairyAmerica, representing four major US producer-owned dairy co-operatives, joined GlobalDairyTrade.

 

As of October 2011, GlobalDairyTrade has become a multi-seller, multi-product trading platform with two auctions per month, and the online auction is trusted by buyers as well as sellers to transparently and efficiently discover a fair and market-clearing price for a total of seven different categories of dairy food ingredients traded globally.

 

GlobalDairyTrade has sold more than $5 billion until now. Some 700,000 metric tonnes of products are traded annually, and there are approx. 500 bidders registered from 80 countries around the world.

 

Arla Foods will start offering Skim Milk Powder (SMP) Medium and Low Heat products and then, over time, other products will be evaluated and added.

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EU Approves Arla’s German Acquisition


The EU’s competition authorities have given the go-ahead for Arla Foods’ acquisition of Allgauland-Kasereien in Southern Germany. Allgauland-Kasereien will now become a member of the Arla Group after Allgauland’s milk producers gave the green light to the deal in September.

 

Allgauland-Kasereien has an annual turnover of Eur307.8 million and is supplied by 1,338 milk producers. It operates four production plants, primarily producing cheese and butter, and employs 306 people. The German business also has a 30% co-ownership of the whey joint venture Milei (70% owned by a Japanese partner), and owns 50% of Bergland (a joint venture with Bayernland).

 

Germany is one of Arla’s core markets. Indeed, the Danish co-operative aims to become one of Germany’s leading dairy companies. The first key step towards achieving this ambition was taken at the beginning of the year with the merger with the North German Hansa-Milch, which produces fresh products and butter. With the acquisition of Allgauland-Kasereien now in place, Arla will also be present in the southern part of Germany.

 

“We see important potential in Allgauland-Kasereien’s cheese production. They produce excellent speciality cheeses for which there is important international potential and it is for this reason that the dairy is of interest to Arla Foods. Some of their products will supplement the cheeses Arla already makes, among them the cheeses marketed under the House of Castello quality brand. We see great potential in Allgauland’s products and not only in Germany,” says Tim Orting Jorgensen, executive vice president in charge of Arla Foods’ international markets.

 

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Arla to Sell Dairy in Poland


Arla Foods is disposing of its factory at Goscino in Poland in order to centralise its current production of mozzarella cheese at its dairy plant in Rodkaersbro in Denmark. The move is intended to make mozzarella cheese production for Arla’s European markets more efficient.

 

Arla has now begun the process of negotiations with a potential buyer to take over its mozzarella dairy in Goscino. The transaction is planned to be finalised by the end of December 2011. The dairy in Goscino also produces yellow cheese and currently employs 100 people.

 

Senior vice president of Arla Foods, Hans Christensen, who is responsible for Emerging Markets and North America, comments: “Our plans to sell the dairy in Goscino do not change our ambitions on the Polish market. We consider Poland to be a strategic growth market for us, and we remain fully dedicated to continue the current growth of our branded business on this market, which has doubled within the last two years thanks to products like Lurpak butter, Buko cream cheese, and yellow cheese.”

 

He continues: “Selling the dairy in Goscino makes sense, since most of our mozzarella business is elsewhere in Europe and is not a part of our strategic plans for our brands on the Polish market. Our priority in Poland is to offer the Polish consumers high-quality butter and cheese products and to continue our search for business partner relationships, joint venture opportunities, and acquisitions that will support our category focus.”

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Green Light For Arla’s £150 Million UK Dairy Project


Arla Foods’ plans to build the world’s largest zero carbon dairy at Aylesbury in England have been given the go ahead by the local authority. The Danish dairy co-operative has committed to 100% privately fund the £150 million project, creating a dairy which can process and package up to 1.3 billion litres of fresh milk per year.

 

“This will be a state-of-the-art dairy designed to help Arla achieve its growth ambitions in theUK,” points out Peter Lauritzen, chief executive of Arla Foods UK. “In addition to being one of the largest construction projects in theUK, our flagship building will also be the world’s first zero carbon dairy.”

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Executive Changes at Arla Foods


Arla Foods is making changes to its senior management team and to its business group structure in order to shorten the decision making process and to help advance its development strategy aimed at reaching an annual turnover of DKr75 billion by 2015.

 

Arla’s executive management group (EMG), consisting of nine people, will undergo some significant changes as of October 1st. Two members will withdraw, while two new members will be added.

 

Arla’s core markets of Sweden and Denmark are to be treated as separate business units instead of being joined in one Nordic business group (Consumer Nordic). The respective heads of the new Sweden and Denmark business units will each now be assigned a seat on the EMG alongside the third major core market, the  UK. Between them, the three markets account for close to two-thirds of Arla’s turnover.

 

”The other members of the EMG will have a more direct dialogue with the leadership in Sweden and Denmark concerning the implementation of the strategy, and the two country managers will be able to influence important decisions that the EMG makes for the entire group. This will result in a better balance in the overall organisation and offer new perspectives for our strategic considerations,” explains Arla’s chief executive, Peder Tuborgh.

 

The two new business groups will be known as Consumer Sweden headed up by Christer Aberg, and Consumer Denmark headed up by Peter Giortz Carlsen.

 

The changes reflect the decision of two members to retire from the EMG – vice chief executive Andreas Lundby and Hans Ake Hammarstrom, executive vice president with responsibility for Consumer Nordic.

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Arla Foods Increases First Half Revenue and Payments to Members


Reflecting its merger with the German dairy Hansa-Milch earlier this year and price increases in the international dairy market, Arla Foods has reported a 12% rise in first half revenue to DKr26.7 billion (Eur3.6 billion). However, operating profit fell 38% to DKr608 million following a large increase in the milk price paid to Arla’s co-operative members in Sweden, Denmark and Germany.

 

“While consumers in our key European markets are still exercising restraint due to the new economic crisis, we can note strong growth in our international markets, especially in the Middle East and North Africa, where revenue rose by 18%,” says Peder Tuborgh, chief executive of Arla Foods.

 

Peder Tuborgh, chief executive of Arla Foods.

Sales of consumer packaged milk powder are developing soundly in the Middle East and North Africa, as a result of Arla’s focus in recent years on developing a range of products with a high nutritional value, at a price that is affordable for the consumers in the area. Sales of processed cream cheese also show very strong growth. These products are sold to consumers under the Puck brand, which commands a strong position in the Middle East.

 

Arla’s growth markets such as Russia and the USA also achieved fine growth rates in the first half of 2011.

 

During the period Arla improved its earnings significantly, primarily due to rising world market prices, which made it possible to increase the milk price to the co-operative members very substantially. Arla maintained the high payment in May and June, which impacted on the interim result.

 

For the full year, Arla expects to achieve a net profit of 2.5% of revenue, or approximately DKr1.3 billion.

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Arla Foods to Acquire Southern German Dairy


Arla Foods is preparing to strengthen its position in Germany after making an offer to purchase southern German dairy company Allgauland-Kasereien, which is in financial difficulty. The next step in the process is that Allgauland-Käsereien will hold a general meeting at which its milk producers will make a decision regarding the purchase offer. If they decide to accept the offer, the acquisition will be subject to approval by the EU competition authorities.

Allgauland-Kasereien has 1,800 milk producers, operates four production facilities and has an annual turnover of Eur253m, of which 31% is from exports. It primarily produces cheese and butter, but also some fresh dairy products. According to Kuno Rumpel, chairman of the board of Allgauland-Kasereiens, Arla’s offer is “a necessary step towards ensuring the future of our company.”

“We see important potential in Allgauland-Kasereien’s cheese production. They produce excellent speciality cheeses for which there is important international potential and it is for this reason that the dairy is of interest to Arla Foods,” explains Tim Orting Jorgensen, group director of Arla Foods International with responsibility for Arla’s German market. “Some of their products will supplement the cheeses Arla already makes, among them the cheeses marketed under the House of Castello quality brand.”

Earlier this year, Arla Foods merged with the northern German dairy, Hansa-Milch, which produces only fresh dairy products. Arla’s aim is to become one of the largest dairies in Germany. Arla’s strategy also focuses on growth within cheese, including the global House of Castello brand.

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Arla Foods to Use Bond Issue to Help Finance Growth Strategy


In order to broaden its access to finance for funding its growth strategy, Arla is giving professional investors the opportunity to invest in the company through a bond issue. The bonds will be issued in Swedish kroner and have a value of approximately SEK1.5 billion (Eur164m).

Based on a strategy of increasing the group’s turnover from the current DKr49 billion to DKr75 billion by 2015, Arla is aiming for significant growth in a number of markets. The growth will be financed through a combination of owner capital and borrowed funds.

The owner finance will be secured through the consolidation policy approved by co-operative members in the autumn of 2010 when they decided to double their investment (consolidation) in the company. The borrowed funds will come from the group’s lenders, including banks and other financial institutions.

Arla wishes to establish the broadest possible financing platform without compromising on the company’s ownership structure. As a result, Arla Foods will now issue bonds to a value of SEK 1.5 billion to supplement other financing sources.

“Arla has solid backing from its co-operative owners. Nevertheless, we also have a duty to ensure that we, as a company, have the best and broadest borrowing and financing opportunities in our pursuit of acquisitions and investments in keeping with our growth strategy,” says Frederik Lotz, chief financial officer of Arla Foods. “This is why we have decided to issue bonds as an attractive investment for institutional investors.”

The bonds will be listed in Swedish kroner on the Luxembourg Stock Exchange, with a maturity of five years and with Danske Bank and Nordea as lead managers.

”We’ve chosen to issue the bonds in Swedish kroner because Sweden, one of our core markets, is a highly effective market for corporate bonds,” Frederik Lotz adds. “The target group for the issue is primarily institutional investors in Sweden, but I won’t exclude approaching other target groups later.”

Arla’s owners have confirmed that the company will remain a co-operative and not a limited company, with external investors as co-owners. The bond issue will strengthen Arla’s strategy for growth without changing the company’s ownership structure.

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Arla Foods and Milko Hold Merger Talks


The boards of Milko and Arla Foods are discussing a proposed merger of the two Scandinavian dairy co-operatives. Following an unsatisfactory profit performance in 2011 and in order to avoid a future liquidity issue, Milko, one of Sweden’s largest dairy companies, approached Arla with a view to investigating the possibility of a merger.

“At Milko, our finances have been imbalanced for some time and in recent years we have been forced to take several radical cost-cutting initiatives. However, sales development has continued to be very weak in 2011 and the board has therefore decided to dramatically reduce the milk settlement price,” says Milko spokesman Lars Reyier. “The number of dairy cows in Sweden has fallen by almost 50% since 1985. As elected representatives we therefore have both a mandate and a responsibility to seek out modern and unselfish structural initiatives on the dairy market that can provide our members with the best possible market and settlement price for the milk they produce.”

The basic principle of the merger is that the Milko members will become co-operative members and owners of Arla Foods on an equal footing with existing Arla members. The Milko members will receive the Arla milk settlement price as soon as the merger has been completed and approved the Swedish Competition Authority.

 
“Arla has the strength and the structure required to develop the Milko company and to receive milk from the dairy farmers who will transfer to Arla as a result of the merger, regardless of the volume of milk they supply. A merger is in line with our ambition to inspire the Swedish people on food issues and to create conditions for continuing to produce milk in the region,” explains Ake Hantoft, chairman of Arla Foods.

Milko and Arla have already agreed on Arla’s purchase of the Sundsvall dairy. Arla will take over operations there on 1st July. The deal is, however, entirely separate from the merger negotiations.

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Arla Foods to Invest DKr615 Million in Cheese Production


Arla Foods is to rationalise its yellow cheese production to counter international competition and declining milk volumes in Sweden. The Scandinavian dairy group’s restructuring plan aims at consolidating part of the yellow cheese production at its plants at Nr Vium and Taulov in Denmark, which will be significantly upgraded. The investment will have implications for Sweden’s Falkenberg Dairy and possibly the Danish Klovborg and Hjorring dairies.

As a result of the tough competition in international markets for yellow cheese, Arla’s board of directors has approved a DKr615m (Eur82m) investment in the dairies at Nr Vium and Taulov. The Swedish dairy at Falkenberg will be closed and it is expected that two Danish dairies at Klovborg and Hjorring will also eventually be shut. The measures are designed to secure Arla’s future production of a broad range of yellow cheeses at competitive prices.

“Market conditions are tough and if we don’t act now even more jobs will be lost within a few years,” explains Jais Valeur, executive vice president of Arla Foods. “Of course, it’s sad for the many colleagues who may lose their jobs but we hope that we’ll be able to maintain other jobs at Arla’s dairies going forward. An added benefit is that we’ll be able to use Swedish milk more efficiently – for the benefit of both milk producers and consumers.”

Milk volumes have been declining in Sweden since 2003 and to avoid empty plants, Arla has to react to the over capacity problem at its Swedish dairies, which has contributed to increased production costs. To keep costs under control and maximise the milk price paid to the co-operative owners, Falkenberg dairy is being closed.

Falkenberg’s cheese production will be transferred to the Danish dairy in Nr Vium, which will benefit from an expansion programme amounting to DKr125m over the next twelve months.

Over a three period, Arla will expand the dairy in Taulov. With the planned investment, the Taulov dairy will reach production of up to 45,000 tonnes of cheese per year. This will increase the capacity at the dairy by more than 60%. At the same time the capacity at Nr Vium will go up to 59,000 tonnes, which is equivalent to a 34% increase, allowing Arla to produce cheese at lower costs and improving its international competitiveness.

”These changes will create a sound future for Arla’s yellow cheese production,” says Jais Valeur. “Around 25% of Arla’s milk is currently used for cheese-making so this is an important business area for us which we will have to develop – and be competitive in.”

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Chairman of Arla Foods to Retire


Ove Moberg is retiring as chairman of Arla Foods on May 26th. with effect from the next ordinary meeting of the Board of Representatives on May 26. He has served for 19 years as a member of the board of directors and four years as chairman of the Scandinavian dairy co-operative.

Ove Moberg has headed up Arla Foods during a crucial period in the company’s history. In 2010, he and his colleagues on the board decided to retain Arla’s co-operative structure and spearheaded moves to establish a new capital model that required a considerable capital injection from the company’s owners. The capital model is now firmly embedded in Arla’s membership base.

Ove Moberg.

Most recently, in March 2011, the board of directors under Ove Møberg gained the full support from the board of representatives for the merger with the German dairy company Hansa Milch, which has resulted in German co-operative members becoming co-owners of Arla Foods.

Since his election as chairman in 2007, Ove Møberg has been committed to developing the partnership between Swedish and Danish co-operative members. Now he can look back on a period of strong Swedish-Danish relations – thanks to his insistence on transparency and dialogue. This has also formed the basis for the inclusion of German milk producers among Arla’s owners.

Ove Moberg joined the board of directors in the then MD Foods in 1992. He was elected chairman of Arla Foods in May 2007.

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Arla Foods’ Acquisition of Hansa Approved


The European Commission has cleared the proposed acquisition of Hansa-Milch by Arla Food. After examining the operations of the two dairy co-operatives, the Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Arla owned by Swedish and Danish dairy farmers and is active in the production and sale of a variety of dairy products, in particular in Scandinavia and the UK, but also worldwide. Hansa is a German dairy co-operative with a more regional focus and supplies mainly fresh dairy products, longlife milk, butter and milk powder.

The Commission’s examination of the proposed transaction showed that the activities of Arla and Hansa are largely complementary since Hansa’s activities focus on fresh dairy products, and the German market, where Arla has only limited activities. Only in Denmark and Sweden does the transaction lead to horizontal overlaps in the markets for butter, cream and longlife flavoured dairy drinks. However, the market investigation showed that a sufficient number of alternative suppliers exist since customers are able to procure from a wider geographic area. As a result, the transaction leads to rather modest market shares which do not raise competition concerns.

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DMK and Arla Foods to Invest €44 Million in Whey Processing Partnership


DMK (which is being created by the merger of Nordmilch and Humana) and Arla Foods will establish a 50/50 joint venture to process whey for the global food manufacturing industry. The name of the new joint venture will be ArNoCo, and the two partners will invest a total of Eur44m in whey processing capacity. Eur35m will be used to build a whey processing plant at DMK’s cheese plant at Nordhackstedt in Northern Germany, and Eur9m will be spent at Arla Foods’ Danmark Protein plant in Denmark.

The joint venture will buy whey from DMK, estimated at more than 700,000 tonnes annually, and convert it into whey protein concentrate and lactose at the new plant. The Whey Protein Concentrate will then be dried at Arla Foods’ plant Danmark Protein. DMK will supply all related services on behalf of ArNoCo. Arla Foods Ingredients will market, sell and distribute the products to the global food manufacturing industry.

Peder Tuborgh, chief executive of Arla Foods.

The building of the new plant is expected to start in October 2011. The plant is scheduled to be in operation by the end of 2012 creating approx. 24 jobs.

Dr Josef Schwaiger, future chief executive of DMK, explains the rationale behind the move: “Expanding the ingredients business is one of DMK’s strategic growth areas. Its alliance with Arla in ArNoCo is therefore an important step towards higher value added and will strengthen the Nordhackstedt location’s position for the long term.”

Peder Tuborgh, chief executive of Arla Foods remarks: “We have identified the whey business as an important part of Arla Foods’ 2015 strategy and we are set to double the turnover of our whey business. This is an important step forward in achieving that goal.”

Arla Foods is a leader in the global market for whey protein and has other whey partnerships in Argentina, Germany, France, Norway and Sweden. The new joint venture is subject to approval by the relevant competition authorities.

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Hansa-Milch and Arla Foods to Merge


Dairy co-operatives Arla Foods of Scandinavia and Hansa-Milch Mecklenburg-Holstein of Germany are set to merge. A merger plan put forward by the boards of the two companies has now been approved by the members of the two co-operatives. The decision is being implemented with retrospective effect for the full 2011 financial year, and is enacted for January 1st 2011. The merger is not unexpected as both companies have already been co-operating successfully for many years.

Owned by 7,200 farmers in Denmark and Sweden, Arla Foods is the world’s fourth largest dairy group and operates successfully in both domestic and international markets. It is well known for its speciality cheeses such as BUKO, Castello and Hohlenkase, and for Lurpak butter. Owned by 1,200 dairy farmers, Hansa-Milch has enjoyed sustained success in northern Germany, and with its Hansano brand is one of the main providers of regionally-produced fresh dairy products such as milk, cream and quark.

The dairy business of Hansa-Milch, until now owned by the Hansa-Milch co-operative, will transfer to the ownership of Arla Foods under the merger arrangements. Manfred Remus, chairman of Hansa-Milch, who developed the merger plans together with the executive boards at Hansa-Milch and Arla Foods, will continue to head up the company with his team. In addition, consideration will be given in the coming months to the possibilities of expanding the Hansa-Milch plant in Upahl.

Hansa-Milch will now be known as Hansa Arla Milch. It remains a co-operative entity with its own members, and joins Arla Foods in that capacity. This means that the democratic structures are still preserved under the new entity of Hansa Arla Milch. In addition, the northern German dairy co-operative will have its own representatives on the boards and committees at Arla Foods.

Peder Tuborgh, chief executive of Arla Foods.

Under the merger of the two co-operatives, the Hansa Arla Milch farmers are being given a milk purchase guarantee from Arla Foods with no time restriction. In addition, Arla is assuring Hansa-Milch of a milk payment price calculated on the same basis as is used for its Danish and Swedish members.

“In previous years, the price we paid for milk was generally higher than that given by Hansa-Milch. This means that Hansa Arla Milch members can expect a higher price in future,” points out Peder Tuborgh, chief executive of Arla Foods.

The Arla Foods strategy includes paying members the highest possible milk price. “To achieve this objective, we need to continue to grow in Europe, and particularly in the important German market,” explains Peder Tuborgh. “Together with Hansa Arla Milch, our aim is to be one of the top three German dairy companies.”

The merger still has to be approved by from the competition authorities.

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Arla Foods Achieves 2010 Profit Target


2010 has been a year of expansion for Arla Foods following a period of restructuring and cost reduction in 2009. The Scandinavian dairy co-operative increased turnover by 6% to DKr49.03b (Eur6.6b) in 2010 and annual profit by 30.6% to DKr1.27b. In 2010 Arla’s board of directors decided that the company would aim for annual profits of 2.5% of turnover, which was achieved.

Arla Foods delivered significantly improved earnings in 2010 to its owners, Danish and Swedish milk producers. For each kg of milk supplied by its co-operative owners, Arla delivered 38 Danish ore more in 2010 than in 2009. In total, Arla’s earnings for its owners (the Arla performance price) amounted to 252 ore per kg of milk against 214 ore/kg milk in 2009.

”Over the past year, Arla has shaken off the effects of the recession without letting go of its tight cost controls. We’ve committed to a number of investments that demonstrate the company’s focus in the long-term and our readiness to exploit the opportunities offered by the markets in which we operate. One example is the decision to build the world’s largest fresh milk dairy in the UK. Another is that we will continue to streamline and invest in our ingredients business, which is one of the world’s leaders within its field,” says Peder Tuborgh, chief executive of Arla Foods.

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Arla Foods and Hansa-Milch Consider German Dairy Merger


Scandinavian dairy group Arla Foods and the Northern Germany-based Hansa-Milch are considering merging. Representatives of the two dairy co-operatives are already engaged in talks. A decision by the cooperative members as to whether the merger is to come about will be taken in February-March 2011.

Arla Foods is owned by 7,200 farmers in Denmark and Sweden. It is known in Germany for its specialty cheeses Arla Buko, Castello and Arla Hohlenkase, for Arla Kaergarden and Lurpak butter.

Peder Tuborgh, chief executive of Arla Foods.

“Together with Hansa-Milch, we would be able to offer a complete portfolio of dairy products from one single supplier, which will enable us to become an even more attractive partner to the German retail trade,” explains Peder Tuborgh, chief executive of Arla Foods.

Hansa-Milch has long been a key player in the market in Northern Germany, where its Hansano brand makes it one of the most important providers of fresh dairy products, including milk, cream and quark from the region. For Hansa-Milch, Arla represents a strong international partner with an excellent track record in innovation.

“Coming together with Arla Foods would represent the next logical step for the business and would benefit our members,” says Uwe Krause, chairman of Hansa-Milch, which is owned by around 1000 dairy farmers in Schleswig-Holstein and Mecklenburg-Vorpommern.

It is a key element of the Arla Foods strategy to pay members as high a price as possible for their milk. In order to achieve this objective, Arla needs to grow its business further within Europe, and particularly in the important German market. Arla would be able to expand its presence in Germany through a merger with Hansa-Milch.

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Lactalis Makes Offer For Yoplait


French dairy group Lactalis is reported to have made an offer for Yoplait, the international dairy business, to create a big French dairy sector champion worldwide. Such a deal, which values Yoplait at about Eur1.3b, would also and retain the Yoplait brand under French ownership.

Operating through a franchise system and marketed in over 75 countries worldwide, Yoplait had sales of Eur3.8b in 2009. Lactalis reported sales of Eur8.5b last year with 56% generated beyond France.

Yoplait was put in play earlier this year when private equity company PAI Partners decided to sell its 50% stake. However, Sodiaal, the French co-operative, maintains that is does not want to dispose of its 50% stake and Yoplait chief executive Lucien Fa values Yoplait at Eur1.5b.

In addition to Lactalis, other parties interested in Yoplait include Nestle, Arla Foods and General Mills, which operates the Yoplait franchise in the US, along with a number of private equity companies.

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Arla Increases Payment to Farmers as Profit Target Maintained


With Arla Foods maintaining its profit projections for 2010 of DKr1.2b, the Scandinavian dairy co-operative has decided to increase the milk price to members for the fifth time this year.

“During 2010, the global market improved viewed against the crisis year of 2009. This means that prices for dairy products have adjusted accordingly and our earnings have improved. Over the year we have, therefore, gradually been able to raise the price paid to our owners,” explains Peder Tuborgh, chief executive of Arla Foods.

Peder Tuborgh, chief executive of Arla Foods.

He continues: “Arla’s profit target is DKK 1.2 billion, a target that we’ve had within our sights for the past year. Now that we’ve almost reached the end of 2010, we believe that we can achieve our target and, at the same time, increase the milk price.”

While a number of markets continue to suffer the consequences of the economic crisis, sales have been good in certain other Arla markets. Not only does this mean that capacity at the dairies is being well utilised, it also has a positive impact on the bottom line. Some non-recurring items such as foreign exchange factors have also played a part.

Although the current situation is positive, Peder Tuborgh believes that 2011 is expected to be more uncertain. “As a result, we expect the market to see more fluctuations where we as a dairy company will have to react faster to both positive and negative changes in the market,” he says.

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Arla Foods UK to Consolidate Butter Production at Westbury Dairies


Arla Foods UK, the British subsidiary of Scandinavian dairy co-operative Arla Foods, is to manufacture retail packet butter at Westbury Dairies, from August 2011. The move follows the announcement in September that Arla Foods UK was to become a shareholder with UK dairy co-operatives First Milk and Milk Link in Westbury Dairies.

All three parties have been examining ways in which the potential of the Westbury site can be developed and the board has agreed that Arla Foods will operate the existing butter-making facility at the site. Arla will also build a dedicated butter making and packing facility for retail products, in addition to continuing production of bulk butter. About 60 jobs will be created at Westbury Dairies as part of the initiative.

Peter Lauritzen, chief executive of Arla Foods UK.

Historically, Arla’s retail own label butter has been produced at Settle, in North Yorkshire, as well as Gotene in Sweden and Varde in Denmark. The move to produce butter at Westbury consolidates Arla’s UK own label butter requirements into one site, and significantly reduces food miles and transport costs.

Westbury complements the business’s other major butter production facility at Holstebro in Denmark and, potentially, will result in the closure of production lines at Settle and Götene and the closure of the Varde site.

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Nestle Eyes Yoplait


Nestle is reported to be considering joining forces with French dairy group Lactalis to make a joint bid for Yoplait, the yoghurt producer. Yoplait has been in play following the decision by 50% owner PAI Partners, the private equity firm, to sell its stake. The other co-owner, French dairy co-operative Sodiaal, may also be willing to sell part of its shareholding in order to reduce debt following its recent acquisition of Entremont, the French cheese producer.

With sales of Eur3.8b and a gross operating profit of Eur120m in 2009, Yoplait is valued at between Eur1b and Eur1.2b. Using its franchise system, the Yoplait brand has been developed globally with well established local partners. Yoplait branded products are currently marketed in over 75 countries.

Apart from Nestle and Lactalis, other potential suitors for Yoplait include Arla Foods and General Mills, which operates the Yoplait franchise in the US, along with a number of private equity companies.

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Dairy Consolidation in Scotland


Graham’s, Scotland’s leading independent dairy company, is acquiring Claymore Dairies for an undisclosed price. Claymore Dairies was sold earlier this year by Arla Foods and North Milk Co-op to a management buyout also for an undisclosed sum.

The acquisition of Claymore will increase Graham’s annual turnover to about £50m

And the enlarged business will employ more than 400 people.

“Since the buyout, we have had several meetings with Graham’s. During that period, it has become increasingly clear that there would be significant benefits by putting the businesses together,” explains Ian Larg, managing director of Claymore Dairies. “Graham’s’ diversity and greater market position will be a major benefit to Claymore going forward. This will lead to greater security for the dairy, its staff and supplying dairy farmers.”

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Arla Foods UK Becomes Minority Shareholder in Westbury Dairies


British dairy co-operatives First Milk and Milk Link have agreed terms for Arla Foods UK, the British arm of Scandinavian co-op Arla Foods, to become a shareholder in Westbury Dairies, the joint venture company that operates the UK’s most modern skimmed milk powder and bulk butter production facility located in Westbury, Wiltshire.  First Milk and Milk Link have agreed to sell a minority share in the company to Arla.

Westbury Dairies will remain strategically important for both Milk Link and First Milk and it will continue to provide long term balancing requirements for both businesses, along with Arla in line with their strategic requirements. The addition of Arla to the joint venture will reduce the share of the costs borne by the original shareholders, Milk Link and First Milk, and provide a more economic balancing solution for all three businesses.

The enlarged joint venture secures the long-term future of Westbury Dairies. As such, it will continue to play an important role in providing the key balancing capacity necessary for the British dairy industry to meet its annual peaks in production, particularly in support of the fresh liquid milk market. Looking forward, all three parties will work to explore ways to develop further the potential of the Westbury site to complement its existing skimmed milk powder and bulk butter production capabilities.

“This joint venture with Milk Link and First Milk in Westbury Dairies will give us access to the high quality balancing facilities which we require, following the closure of our Northallerton creamery,” says Peter Lauritzen, chief executive of Arla Foods UK:

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Arla Foods Reveals Location For New £150 Million UK Dairy


Arla Foods has announced that it will establish the world’s first zero carbon milk processing facility at Aston Clinton, Aylesbury, in southern England. The site, which is due to be operational in 2012, will also be the world’s first billion litre liquid milk dairy and will entail investment of over £150 million.

During the land search, Aylesbury emerged as the front-runner giving the best overall logistics solution to service Arla’s customers, when considering both raw milk collection from farm and finished product to the retailers. It also provides the best access to a densely populated area.

When it announced its intention to build the new facility in November 2009, Arla referred to it as being the most ‘environmentally advanced in the world’ and has now confirmed its plans to establish the dairy as a zero carbon operation. Throughout the design stage, the potential impact on the environment of each element of the dairy has been evaluated and the best available construction techniques, advanced process technologies and cutting edge renewable energy opportunities will be utilised.

Peter Lauritzen, chief executive of Arla Foods UK.

“Once again, Arla is taking the lead in setting the future standards of the dairy industry. Being zero carbon will put the new dairy in a class of its own, demonstrating our environmental responsibilities and our ambition of becoming the UK’s number one dairy company,” says Peter Lauritzen, chief executive of Arla Foods UK.

Arla is already working with the local authority to agree the scope of the planning application and is in the process of finalising the design specifications. The next step is to appoint contractors to work on the project. It is anticipated that about 500 production, distribution and administration jobs will be created at the site.

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Sodiaal’s Acquisition of Entremont Gains French Approval


The French Competition Commission has approved dairy group Sodiaal’s acquisition of Entremont Alliance, the loss making French cheese producer. The deal will create the fourth largest dairy group in Europe with combined annual sales of more than Eur4b and processing over 5b litres of milk annually. Sodiaal still needs approval from the Belgian and Italian competition authorities.

Sodiaal owns French milk brand Candia and also has a 50% stake in Yoplait, the international yoghurt brand. However, Sodiaal’s partner in Yoplait, private equity firm PAI Partners, is reported to be considering selling its 50% stake in French yoghurt producer. With sales of Eur3.8b and a gross operating profit of Eur120m in 2009, Yoplait is valued at Eur1-1.2b.Yoplait is sold worldwide through a franchise network.

Speculation is also mounting that Sodiaal may sell part of its shareholding in Yoplait to reduce debt following its acquisition of Entremont. A sale of Yoplait is likely to attract the interest of global food processors such as Nestle, Arla Foods and General Mills, which operates the Yoplait franchise in the US, along with a number of private equity companies.

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Interim Profit Surges at Arla Foods But a Challenging Autumn Ahead


Increased prices in the global market, rising foreign exchange rates as well as strict control of costs have allowed Scandinavian dairy group Arla Foods to post a hugely increased profit of DKr697m (Eur93m) on a turnover of DKr23.8b for the first half of 2010, while still increasing the ongoing payment to its co-operative owners. This compares with a 2009 interim profit of DKr263m on a net turnover of DKr22.3b.

“Arla Foods has had a good half-year during which we increased the milk price paid to our owners three times,” says Frederik Lotz, chief finance officer of Arla Foods. “Last year’s extensive savings campaign trimmed the group’s costs and we’ve succeeded in maintaining the low cost levels achieved by the savings campaign in 2009. The accounts demonstrate that we have a sound platform for growth.”

He continues: “We are maintaining good market positions in our biggest markets in the UK, Sweden and Denmark, and the significant part of the growth in the first half year was also created by external factors such as the positive foreign exchange rate developments for our key export currencies. We are continuing to see increasing growth in markets such as Russia, China and the Middle East as well as the potential for further growth in a number of our markets going forward.”

Having recently decided that its annual results should represent 2.5% of turnover (compared to 2% previously), Arla Foods has revised this year’s profit target from DKr950m to DKr1.2b.

Although both turnover and earnings increased in the first half of the year, Arla Foods expects the next six months to be challenging. The first half of the year was characterised by higher prices in international commodity markets where Arla Foods sells butter, cheese and powder to industrial customers. However, it is not anticipated that these high prices will continue for the remainder of the year.

”We have to expect lower earnings from the commodity markets in the second half of the year and at the same time we will see the full effects of the increases in the Arla price,” Frederik Lotz points out. “A decisive factor will be how consumer confidence develops. European consumers still bear the scars of the economic recession – many are still cautious and prefer discount products to brands and this obviously impacts on earnings.”

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Arla Foods Expands Cheese Production in America


Arla Foods is expanding its dairy in Hollandtown, Wisconsin, in the US to match American consumers’ growing interest in ‘premium’ class quality cheese. The expansion will be completed in early summer 2011 and is set to boost sales.

Despite the financial crisis, Arla’s American sales continue to rise. Last year, Arla’s sales in the US rose by 10%, and midway into 2010 volumes sold are showing a 20% year-on-year increase. The progress is remarkable in that the niche market for quality cheese, Arla’s speciality in the US, saw a general decline during the crisis.

In American supermarkets, Arla products belong in the delicatessen departments.

About 70% of Arla’s products for the US are manufactured at the Scandinavian group’s two US dairies in Muskegon, Michigan and Hollandtown, while 30% is imported from Denmark

Arla sells around 16,000 tonnes to American consumers per year. This is only a fraction of total cheese sales in a market that is generally regarded as huge in terms of cheddar and processed cheese for burgers, pizzas and many other fast food products.

In American supermarkets, Arla products belong in the delicatessen departments. As Havarti and blue cheese are regarded as niche categories, this is an area with significant potential for boosting sales.

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Yoplait For Sale


Private equity firm PAI Partners is reported to be considering the sale of its 50% stake in French yoghurt producer Yoplait. With sales of Eur3.8b and a gross operating profit of Eur120m in 2009, Yoplait is valued at Eur1-1.2b.Yoplait is sold worldwide through a franchise network.

Speculation is also rife that French dairy co-operative Sodiaal, which owns the other half of Yolait, may sell part of its shareholding in order to reduce debt following its recent acquisition of Entremont, the French cheese producer.

A sale of Yoplait is likely to attract the interest of global food processors such as Nestle, Arla Foods and General Mills, which operates the Yoplait franchise in the US, along with a number of private equity companies.

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Arla Foods Continues to Increase Milk Price


Continuing progress in its international industrial markets and a generally increasing demand for milk have enabled Arla Foods to raise the price paid to its co-operative members per kg of milk – the so-called Arla price – by 7.5 Danish ore.

“Global market prices in the industrial area combined with exchange rate developments have resulted in a significant boost to earnings. At the same time, we’re seeing that the increased demand for milk is beginning to impact on prices in the retail sector which have remained low all through the economic recession,” says Peder Tuborgh, chief executive of Arla Foods.

This is the fifth time in succession for the Arla price to be adjusted upwards. The increases since October 2009 total 50 ore.

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Arla Foods Invests For Growth


Having been forced by the severe economic environment in 2009 to make cuts across its business, Arla Foods has substantially increased its investment budget for 2010 to DKr1.84 billion (Eur250 million) as the Scandinavian dairy giant again focuses on expansion.

In addition to marketing expenditure to drive sales growth, the investment budget has earmarked funds for significantly expanding capacity and ongoing efficiency improvement measures. Arla Foods will spend almost DKr920 million – nearly half of the total budget – on increasing capacity and making structural adjustments in 2010. This is double last year’s investment level and equivalent to about 4% of projected turnover. The dairy group is seeking to increase 2010 turnover by 2-3% to DKr47 billion.

The decision to invest in expansion this year makes a change from the retrenchment of 2009, when the focus was on cost reduction.

PederTuborgh, chief executive of Arla Foods.

“The objective is to achieve the highest possible milk price for our farmers in a very price conscious market with substantial and rapid fluctuations. During the past year, we have put considerable effort into the savings programme and have been dealing with the implications of the global economic situation. During 2010, we will again show our customers, and consumers, across the world what Arla stands for and what we can and want to achieve,” explains Peder Tuborgh, chief executive of Arla Foods.

Driving Sales and Profits

A 30% hike in marketing expenditure is designed to fuel sales and profits. Investment behind Arla Foods’ global brands, Lurpak butter and Castello cheese, will be intensified as will support for the Arla brand and the Closer to Nature concept, as the dairy giant continues to concentrate on shifting processing from industrial to value added products, so reducing its reliance on commodity markets.

Of course, the anticipated growth in sales and profits will require a corresponding increase in production of value added products and consequently an expansion of capacity.

New investments commencing during 2010 include the construction of a new drying tower at Denmark Protein Nr Vium and the expansion of yellow cheese capacity to 44 million kg per annum. The largest single amount, however, is the allocation of DKr182 million for the completion of the expansion to Arla Food’s Stourton dairy in the UK.

In conjunction with investing heavily in expanding production capacity and making associated structural adjustments, Arla Foods will also continue to implement the group-wide DKr1b cost savings programme, including 250 redundancies, launched in the spring of 2009 as it maintains its focus on efficiency. Indeed, it is imperative that costs are kept at 2009 levels.

Focus on Adding Value

As a co-operative, Arla Foods’ priority remains the price paid to milk producers, whose earnings are under pressure. In 2009, 31% of Arla’s raw milk went to industrial products but the aim is to cut this proportion to 27% as sales of processed products are crucial in order to achieve the highest possible milk price for dairy farmers. “Our focus is to continue to add more value to our milk and to continue to work towards achieving our growth target for 2015 of DKr75 billion, and we will not achieve this without significantly expanding our capacity,” says Peder Tuborgh.

Reflecting its strategy of adding value to its milk, Arla Foods has just formed a partnership with Starbucks, one of the world’s largest coffee brands, to enter the ready-to-drink coffee market in Europe.

Global Leader

Arla Foods was formed in 2000 through the merger of two dairy farmer co-operatives – Arla of Sweden and MD Foods of Denmark. Arla Foods has production facilities in 12 countries – Denmark, Sweden, the UK, Finland, the US, Canada, Argentina, Brazil, Poland, Germany, Saudi Arabia and China – and its products are sold globally, although its two main markets are Scandinavia and the UK. Arla Foods is one of Europe’s leading dairy processors and also ranks within the top ten globally.

Arla Foods has a broad product range and is active in all the main sectors of the dairy market. Fresh products, including liquid milk, cream and yoghurt, generate about 45% of turnover, followed by cheese at just over 25% and milk powder on 13%. Butter and spreads, including Arla Foods’ flagship Lurpak brand, account for 13% of turnover.

Development Strategy For 2013

Peter Turborgh recently unveiled Arla Foods’ five year development strategy, setting out clear global ambitions for the group by building on its strength in Scandinavia and the UK and by harnessing the potential of its strong brands. The strategy incorporates five key elements with the central aim of delivering the best milk price to Arla Foods’ co-operative farmer owners.

Arla Foods will continue to concentrate on developing its traditional core markets and aims to become the market leader in Denmark, Sweden and the UK, and number two in Finland. However, Arla Foods has added Germany and Poland to its core markets and will increase activity there as it aspires to be among the top three dairy companies in both countries.

The Netherlands is also now a new core market following Arla Foods’ recent acquisition of Friesland Foods Fresh in Nijkerk from Dutch dairy co-operative Royal FrieslandCampina. The Nijkerk business has sales of over Eur200 million. The acquisition is “in perfect alignment with our strategy to become the preferred dairy for consumers in Northern Europe,” says Peter Tuborgh.

Furthermore, Arla Foods, which is currently present in 80 markets worldwide, will prioritise its global activities to achieve the best return from resources. As part of this strategic shift, the US, Russia and China have been identified as special growth markets, and will be assigned a larger share of the group investment budget. Other markets have been defined as ‘tactical’ and business activity will be maintained at current levels.

“We cannot do everything in all markets. We must be extremely strong in some international markets – but not everywhere and not in all categories,” he points out.

Arla Foods will concentrate on developing three global brands – Lurpak butter, Castello cheese and Arla, which is both the corporate brand and the brand for the majority of the group’s other products.

The product development budget will be doubled with the focus on natural ingredients, health, taste and organic products. Indeed, Arla Foods has just joined forces with Danish neighbour Danisco to establish a new research partnership, which aims to develop infant formula more closely resembling mothers’ milk.

Another goal is to double sales of powdered whey proteins to become the global leader. Arla Foods purchases whey from other major cheese producers and has processing facilities in several locations across the world.

The fifth element of the development strategy has entailed setting a target of a 25% reduction across the group in greenhouse gas emissions from transport, production and packaging by 2020. This means working with its co-operative members, research institutions and industry associations to reduce carbon dioxide emissions at farm level.

Focused Approach

“The strategy focuses on what we excel at and on markets where we are, or can, be leaders,” comments the Arla Foods chief executive. “It is focused, ambitious and demanding. The next five years will be an enormous challenge for us all, but it’s not impossible for us to achieve our objectives and it is important for us to give our all and gain ground.”

The increase in the 2010 investment budget to DKr1.84 billion signals Arla Foods’ commitment to aggressively pursuing its five year development goals after a period of consolidation in 2009.

Difficult Year

Like other international dairy groups, Arla Foods had to contend with the effects of global recession and price pressures coupled with a major imbalance between supply and demand for milk throughout 2009. Consequently, 2009 was characterised by cost cuts across the business and a reduction in the milk price paid to co-operative members as Arla Foods adjusted to the changed market scenario.

Net profit in the first half of 2009 for the January to June 2009 period was DKr263m and turnover declined by almost DKr2b to DKr22.3b, of which DKr1.7b was due to the fall in the exchange rate between Swedish krona, sterling and Danish kroner.

Although the half-year results were in line with budget, Peder Tuborgh admits that the economic downturn was “more extensive and prolonged than expected and has impacted all Arla’s markets.”

Outlook For Prices

However, there were positive market signs as 2009 drew to a close. Peder Tuborgh expects that prices in the retail market will rise just as those for industrial products have, as Arla Foods continues to ensure that its farmer members are given the best price for their milk. “In recent months we have seen a rise in commodity prices, which have been mainly driven by increases in the price of industrial products, in particular bulk cream. As a result of these developments we raised the milk price paid to the members of the cooperative in October and again in December,” he remarks. “However, the overall price for raw milk is insufficient to ensure that dairy production is sustainable globally which is why there needs to be an improvement in dairy product prices in the retail sector.”

UK Growth Strategy

Accounting for over a quarter of group sales, the UK is central to Arla Foods’ future development. Indeed, the UK is the dairy group’s single largest national market. Arla Foods has invested heavily in its UK business and will continue to do so as part of its growth strategy for this important region.

Processing over two billion litres of milk annually, Arla Foods UK is on the Britain’s largest dairy companies. In addition to being a major supplier of liquid milk and cream to the top retailers, Arla Foods UK leads the butter, spreads and margarine sector, as well as supplying other added value products such as flavoured milk, cheese and yoghurt.

Although UK consumers have been trading down to less expensive dairy products, Arla Foods UK’s three major brands have continued to perform well. Two of these brands – Cravendale and Anchor – are each valued at more than £100 million, while Lurpak is worth over £200 million. Launched in 2001, Cravendale is now the number one milk brand in the UK and is worth £142 million, growing at 20% year on year. The Anchor butter and spreads brand is produced under licence from Fonterra, the New Zealand co-operative.

Anchor Deal

Peter Lauritzen, chief executive of Arla Foods UK.

Until recently, Arla Foods and Fonterra operated a joint venture in the UK but Arla has now bought out Fonterra’s 25% stake. “Anchor is a very strong, successful, brand in the UK and it is a good business in which to invest,” points out Peter Lauritzen, chief executive of Arla Foods UK. “The butter, spreads and margarine market is a key category for Arla and this is a logical step for us to take this brand forward and develop it further in the UK.”

In line with its co-operative principles, Arla Foods has built a close working relationship with British dairy farmers. Indeed, the Arla Foods Milk Partnership, a group of over 1,400 members, supplies 80% of Arla Foods UK’s total raw milk requirements and also owns a stake in the British dairy processing company.

Capital Investment

To support its ongoing development in the UK market, Arla Foods is investing £70 million (Eur80m) to expand its flagship dairy at Stourton in Leeds, having already spent £100 million at the site, which processes milk for the major supermarkets as well as leading milk brand Cravendale. The additional investment at Stourton allows the site to process a range of fresh dairy products, including fresh cream and Creme Fraiche. It also permits Arla Foods to manufacture cottage cheese for the first time in the UK.

In line with its strategy of improving efficiency, Arla Foods has embarked on a LEAN programme in the UK. A pilot is taking place at the Stourton complex where a robust LEAN model is being developed which will then be rolled out to other UK sites.

World’s Most Advanced Dairy

Arla Foods also plans to build a new one billion litre liquid milk processing facility on the outskirts of London as part of its UK growth strategy. The new facility will be the largest and most technologically advanced of its kind in the world.

Intended to create a platform for Arla Foods UK to grow its fresh milk business, the new dairy will be operational in 2012. According to Arla Foods, the new London dairy will set new world-class environmental and efficiency standards.

“Arla is totally committed to a long-term sustainable future in the UK and the construction of the new dairy demonstrates that commitment. Incorporating the most sustainable building techniques the dairy will be the largest, most efficient and environmentally advanced in the world,” says Peter Lauritzen. “We already have an industry leading site at Stourton, in Leeds, but our new, cutting edge, facility in London will be world leading and take dairy processing into the next generation.”

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