Arla under pressure from cheap German milk imports

Related tags Arla foods Denmark

From this month, German milk will be available at Danish retailer
Dansk Supermarked's stores, a move that could affect milk prices
and production across Europe.

According to Danish press reports, the two Danish multiples owned by the Dansk Supermarked Group, Føtex and Bilka, began to sell cheap German milk on Friday. Sold under Dansk Supermarked's own brand "Engholm", the milk will be clearly marked "Produced in Germany."

According to Swedish-Danish dairy group Arla, German dairies are able to sell discounted milk in Denmark because their milk producers are being paid less for their milk than their Danish colleagues north of the border. The launch of the imported milk follows Arla's decision earlier in the year to market the discounted "DanMælk" which has cornered 12 per cent of the Danish milk market, but this share could now shrink.

"The imports of German milk will impact negatively on the milk price paid by Arla to farmers,"​ Knud Erik Jensen, Arla Foods' chairman, told the Danish daily Jyllands-Posten​.

Increasing competition in its domestic market comes at a difficult time for Arla. At the meeting of the Board of Representatives this week, managing director åke Modig presented a forecast indicating that the result for Arla Foods' divisions will fall approximately DKK 100 million below budget.

"The most dramatic change is in Denmark where the dairy market has undergone significant change within an extraordinarily short time,"​ said åke Modig. "Cheap German milk has arrived in supermarkets and although Arla Foods' response to the German milk, DanMælk, has proved an effective answer by achieving a market share of 12 per cent, the fact remains that the milk price continues its downward trend in Danish stores."

However, milk producer and Arla supervisory board member Jan Nørgaard who farms in Skærbæk near the Danish/German border has no complaints about German milk being available to Danish consumers.

"I'm all for free competition and regard Europe as one large market,"​ he said. "Arla Foods is a major exporter so it's no good trying to protect the Danish market and hope we can avoid competition from our neighbours.

"We shouldn't complain about the competition, but use it to give us the necessary strength to compete in the European and, indeed, the global market."

Arla​ is following a strategy of promoting quality in the face of the new price competition in the Danish milk market. Nørgaard believes that it's now more important than ever that Arla Foods communicates its quality programme, Arlagården, and explains its importance to consumers.

"With Arlagården, Arla Foods demonstrates that product responsibility goes beyond the dairy,"​ he said. "We farmers make a difference because we have agreed to set up rules and regulations for our production through the Arlagården quality programme."​Anne With Damgaard, Arla's Denmark division marketing director said: "Our message to consumers is that milk is not just milk. Arla Express Milk constitutes the shortest route from farm to shop. It takes just 12 hours from the time the milk is collected from the farm until it arrives in the stores."


Related topics Manufacturers Fresh Milk Arla Foods

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