Arla Foods launches new strategy
In the next five years, Arla said it is prepared to increase its investments by more than 40% to more than €4bn ($4.62bn) to focus on sustainability, digitalization, new production technologies and product development while also increasing its dividend to more than €1bn ($1.16bn) to support its farmer owners on their sustainability journey.
Going forward, the supplementary payment will be 1.5 cents per kg of milk, up from 1.0 cents per kg of milk, provided the company achieves an annual net profit of at least 2.8% of revenue, and to be paid out in two installments in March and September instead of only once a year.
“With our Good Growth 2020 strategy we created the right recipe to grow our brands, deliver efficiencies and invest in sustainable actions across our value chain, while securing a competitive milk price to our farmer owners. Standing on this successful platform, our new strategy Future26 will move our cooperative to the next level, grow our global business responsibly to meet the fast-changing eating habits among consumers and their increasing demand for sustainably produced dairy products and improve returns to our farmer owners,” said Arla Foods CEO Peder Tuborgh.
In the next five years, Arla said it will continue data-driven sustainable dairy production throughout its value chain and raise its commitments to meet the 1.5-degree goal set by the Paris Agreement.
Arla said its farmer owners have worked towards sustainable farming and today produce milk with an average of 1.15kg CO2e per kilo of milk.
Across its operations, Arla has raised its target to a 63% reduction of greenhouse gas emissions by 2030, which it said it will deliver by accelerating its conversion to green electricity, fossil-free fleets, making all packaging recyclable and having zero virgin plastics in branded packaging by 2030.
In the next five years, Arla said it will grow its branded business by 3-4% year on year by investing in category innovation and development, new production technologies and supply chain scale.
Arla will also invest in its global specialized milk and whey ingredients business, Arla Foods Ingredients (AFI), to develop new solutions for its partners. The newly-opened Innovation Centre in western Jutland in Denmark aims to be the focus of AFI’s future opportunities and innovation efforts.
As urbanization and higher average incomes change consumer food habits towards more convenience and dining out, Arla said it will fast track its e-commerce capability to support its customers’ online channels and invest in foodservice innovations and technologies within categories such as mozzarella.
Building on its transformation program Calcium, Arla said it will maintain its focus on optimizing its ways of working through what it calls “Fund our Future,” which aims to reach cost savings of €500m ($578m) before inflation during the next strategy period. Arla will invest in end-to-end solutions to deliver efficiencies and improve productivity through further automation, digital tools, and up-skilling of employees, reducing waste and energy consumption.
“We are at a defining moment for dairy and our farmer owners. The twin challenges of climate change and malnutrition are the most difficult facing our global food systems. It requires urgent action, and dairy is part of the solution. If there ever was a time to step up and create the future of dairy, it is now. In the next five years, we must collaborate with our owners, customers, and partners to accelerate our transformation to a resilient and sustainable dairy value chain fit for the future,” Tuborgh said.