Arla targets supply chain balance in cost cut plans

- Last updated on GMT

Related tags: European milk board, Denmark

As European farmers’ associations call for better cooperation between processors and milk suppliers over pricing, a leading cooperative groups says it is already having to tighten its budget across the supply chain.

Arla Foods told following recent announcements about targeting an additional DKK1bn in cost reductions through its operations this year, farmer payouts was one of a number of areas that had been cut in light of the economic downturn.

Last week, farmers’ group The European Milk Board (EMB) said it was targeting using protests at dairy facilities around Germany to push for talks with processors over a possible joint solution to allay all stakeholder fears about profitability.

Price fears

As milk prices have dropped strongly from the record highs being paid for commodities back in mid-2007, farmers have called for greater government and industry support, claiming their operations are not economically viable in the current market.

"We have a common problem in the milk market - we can solve this together - we as future orientated dairy farmers are ready to do so,"​ said the EMB in a statement last week.

Arla reductions

Arla spokesperson Astrid Gade Nielsen said that as a dairy cooperative owned by the farmers providing its milk, the company has always had to act in close cooperation with its suppliers in all aspects of business.

In light of concerns about the economic downturn on its operations though, the group claimed it was attempting to pursue balanced cost reduction accross its entire supply chain.

“We have looked as cost reductions in a number of different areas from having to cut employee numbers, to reducing spending in other areas such as capacity, ingredients and marketing spend,”​ said Gade Nielsen. The strategy has also seen the company having to cut payouts to member suppliers for their milk, the company added.

As part of the savings strategy, Arla said last week that it had been forced to cut 250 positions across its operations in Viby, Stockholm, Leeds and other European offices and not fill an additional 50 roles.

As a co-operative company, our aim is to maintain a good milk price for our owners, which has proved to be extremely difficult since the autumn of 2008,”​ stated the company last week. “On 1 March, we reduced our milk price by more than DKK 1 billion, which has put our owners in a difficult situation and there is now a risk that we’ll lose future milk suppliers.”

Related topics: Arla Foods, Manufacturers

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