Arla adopts local focus on global consumer markets

By Jess Halliday

- Last updated on GMT

Related tags Middle east Cheese Asia

Arla has announced a reorganisation of its consumer operations in
eight markets including simplifying its business model in the
Middle East, where a second boycott of its products is in place.

The Scandinavian group has a strong consumer presence in its home markets and the UK, but it is now aiming to get closer to its customers and consumers in Germany, Poland, Russia, the Middle East, Spain, Greece, the United States and Canada.

The new strategy involves the relocation of staff closer to these geographic markets.

In particular, it will be placing a management team in Dubai, led by director Finn Hansen.

"Our ambition is to significantly increase our turnover and grow through increased market shares and acquisitions and by focusing on five product categories in eight selected markets," said executive director Tim Ørting Jørgensen, who is in charge of the international business group.

The five product categories are mold cheese, BSM (butter, spreadable, margarine), white cheese (formerly known as feta), yellow cheese, and cream cheese.

Arla has said that the changes to its international operations will not affect production.

However its staff in Copenhagen will be halved - from 70 to 35 - as activities are moved to local markets.

The Middle East challenge Since February Arla has faced its second boycott in the Middle Eastern market, as a result of publication of Prophet Muhammad cartoons in Danish newspapers.

Spokesperson Theis Brøgger told that the boycott is not centrally controlled by it is a trend anchored amongst consumers.

Arla faced a similar boycott in the Middle East following cartoon publication in 2006, when it lost some DKK450m in earnings.

With the new team on the ground, however, it is now integrating its five subsidiaries and joint ventures in the region, with a view to creating growth and to "steer the region through the turbulent period since the first cartoon crisis in 2006."

"We believe in a profitable future in the Middle East where we have strong quality brands for which consumers are willing to pay a premium," said Hansen.

"But we must also accept that the Middle East is no longer the same stable market as it once was.

This is why we're adjusting our business model to face up to any future fluctuations."

Hansen added that the simplified structure in the Middle East will involve focusing on "the right customers" - as well as simplifying the distribution network.

Other, unspecified, initiatives will also come on-line as the business model is adjusted.

Closure in Manchester The new of the international reorganisation comes just days after Arla Foods announced that it will close its dairy and distribution centre in Wythenshawe, Manchester, UK, by January 2009.

The proposal - which is under immediate discussion with the 300 employees who will lose their jobs and their representatives - will see processing of raw milk transferred to facilities at Ashby, Stourton and Hatfield Peverel.

"Our proposal is based on the thorough review of our production and distribution facilities that we have carried out in line with our strategy of improving our performance in standard milk," said Lars Dalsgaard, business group director, supply chain.

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