Arla Foods said it did not expect sales in the Middle East to reach pre-boycott levels until the end of 2007, suggesting consumers had significantly disrupted the dairy group's development plans in the region.
Arla has endured a difficult year in the Middle East after a boycott on its products became a symbol of protest against the firm's native Denmark. Muslims were incensed by cartoons of the prophet Muhammad published by a Danish newspaper.
Arla was forced to halt production and ended up having to sell off produce nearing its sell-by-date at discount rates this summer.
The group re-iterated this week it would lose around DKK400m (€53.6m) in 2006 due to the boycott.
The prospect of problems continuing into 2007 is a blow for the firm, which had previously planned to double sales in the Middle East over the next few years.
The group was planning a multi-million Danish Kroner investment, including factory extensions and a pilot plant to test new products and packaging, spokesperson Louis Honoré had told DairyReporter.com. The group dominated the region's dairy sector with its Puck cheese and Lurpak butter brands.
Now, it is merely planning to hold off a growing number of competitors, which have used the boycott to knaw away at that strong market position.
"The religious and culturally conditioned agenda has now been superseded by commercial pressures where we're facing stronger competition from other dairy companies," said Finn Hansen, head of Arla's Middle East business.
There were hints that at least some costs from the boycott would be passed right through the business. Arla said the DKK400m boycott loss equated to a DKK40,000 loss for each of its 10,000 co-operative members in Denmark and Sweden.