Farmers at Milko are now likely to join Arla under merger plans announced last week (to read about the proposals, please click here).
Dominant market position
Such a move would further increase Arla’s growing dominance of the Swedish milk market.
Mintel data shows that Arla increased its market share from half to almost two thirds between 2008 and 2009 as Milko had its share squeezed from 26 per cent to 12 per cent.
The challenge for Arla is the prospect of now having a very big stake in a declining market. Milk consumption has been falling for some time as Swedes drink less and less milk with meals, preferring water or juice.
Figures from the Swedish Dairy Association indicate that the average yearly consumption of milk per person in the country has dropped from 105.7 litres in 2006 to 94.1 litres in 2010.
And the likelihood is that the decline will continue over the coming years. Mintel predicts a CAGR of – 1.8 per cent through to 2014.
Where are the opportunities?
Despite the grim statistical picture, Arla is confident that opportunities remain in Sweden.
Milk consumption may be falling but Arla spokesperson Claes Henriksson said there are positive developments in cream and butter. And the company is seeking value growth through new product development.
“Arla are launching a wide range of new products in for example the ecological segment (10-15 new products in 2011) and lactose free,” said Henriksson.
Higher spending on advertising is also planned as the co-op looks to supports its strongest brands in Sweden - Arla Ko (guaranteed milk from Swedish farms), Arla Köket (Arla Kitchen), Bregott (spreadable butter) and Castello (global cheese brand).