Arla to cut €400m in costs

By Jim Cornall contact

- Last updated on GMT

Arla's 'Calcium' cost-cutting program will take effect throughout the company, covering production, products, procurement, promotional marketing and people.
Arla's 'Calcium' cost-cutting program will take effect throughout the company, covering production, products, procurement, promotional marketing and people.
European dairy cooperative Arla Foods has launched an internal transformation program called “Calcium,” which is set to deliver more than €400m ($492m) of savings by the end of 2020.

The goal is to achieve the savings through improved efficiency in all areas of the company.

While the program is already under way, the company said it cannot yet disclose publicly how many jobs will be affected, or if there will be plant closures.  Arla said it will communicate details about the process throughout the program.

Of the total cost reduction, Arla said it expects to return approximately €300m ($369m) to farmers through the farmgate milk price with the additional savings being reinvested in the company’s Good Growth 2020 strategy to fuel further growth and improve profitability.

Ongoing cost savings and efficiencies are a vital part of Good Growth 2020 strategy, the company said.

Calcium will take effect throughout Arla, covering production, products, procurement, promotional marketing and people.

It aims to ‘transform ways of working, reduce bureaucracy and complexities, and cut costs.’

Brexit, fat and protein

While Calcium has been planned since the end of last year, the scope has been increased by Arla’s management in recent months in light of external challenges facing Arla as a result of the extent of the company’s exposure to the British pound and unfavorable developments in commodity markets.

Arla Foods’ CEO, Peder Tuborgh, said Arla Foods has always had a culture and strong track record of creating efficiencies and removing costs for the benefit of the farmer owners, customers and consumers, “so in that sense nothing is new.”

“What is new, however, are two unexpected developments that have hit us, both of which are outside of our control,”​ Tuborgh said.

“These are the currency impact of Brexit on our actual performance and the impact of the reversal in commodity prices on fat and protein on our relative performance against our international peers.

“These developments have negatively impacted our profitability, and as a responsible business we have to act to remove the impact of these new developments, and the action we are taking is a three-year transformation program which cuts across our whole business and sets out to restore our profitability.”

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