Arla sees increase in revenue

By Jim Cornall

- Last updated on GMT

Pic: Arla
Pic: Arla

Related tags Arla Arla foods Dairy Butter Starbucks

Arla UK said its business delivered a solid performance throughout 2021 despite continued disruptions from the pandemic, labor shortages and renewed market volatility created by high inflation.

The company said it delivered growth of its branded sales and returns to its farmer owners who are faced with rising costs whilst continuing to invest in more sustainable milk production.

Arla’s revenue in the UK grew by 2.6% to £2.17bn ($2.94bn), and the company delivered overall branded volume growth of 3.8% despite the cumulative effects of driver and labor shortages, accelerating inflationary cost pressures dampening the performance somewhat.

In the first half of the year, performance was under-pinned by continued heightened in-home consumption as a result of the extension of Covid-19 lockdown in the UK. Arla said it recorded strong branded volume growth, with Arla and Starbucks continuing to consolidate their market share positions.

The latter half of 2021 saw the full reopening of the foodservice sector in the UK, which led to a 19% branded volume growth for Arla UK’s foodservice business, driven by the company’s Arla Pro brand, with sales growing by 31.7%.

“2021 was a tough year where we had to navigate through several external challenges to deliver much-needed returns for farmer owners. Like many others in the industry we faced disruption from Covid and from labor shortages, but the biggest disruption has come from the unprecedented inflation, which is driving up the cost of operations across the supply chain. Against this challenging backdrop, we have performed well,”​ said Ash Amirahmadi, managing director for Arla Foods UK.

“The value of producing milk here in the UK is increasing like never before, due to the rising costs on farm and across the supply chain combined with global demand for dairy causing European commodity prices to continue their strong development. This will be welcomed by our farmer owners who are also having to invest more to stay at the forefront of sustainable farming as they continue to be among the most climate efficient dairy farmers in the world.”

After a record-breaking branded growth in 2020 due to the increase in home cooking during the lockdown phases of the pandemic, sales of several of Arla’s strategic brands continued to grow in 2021, including Arla Cravendale (6.7%), Arla Skyr (12.5%), and the yogurt brand Arla Protein (38%). The total Arla brand grew 9.6% across the full range of products in 2021.

For the second consecutive year, Arla UK also grew its licensed sales of the Starbucks brand by more than 30%, however the growth of brands like Lurpak and Anchor was affected by the butter- and spreads category readjusting itself after a sales spike in 2020. While both brands did improve their overall market share positions, strategic branded revenue sales of Lurpak decreased by 4.1% in 2021 (after 14.9% growth in 2020), while Anchor decreased by 6.3% in 2021 (after 9.7% growth in 2020).

“I am pleased to see so many of our brands continue to grow as more and more British consumers have turned to these brands in recent years. As a farmer-owned cooperative, we are all about building strong brands that add more value to consumers and, in doing so, also generate more sustainable financial returns for the farmers,”​ Amirahmadi said.

Total Arla Group revenue increased by 5.6% to €11.2bn ($12.8bn) driven mainly by higher sales prices and strategic branded sales growth of 4.5%.

Arla’s performance price – which measures the value Arla creates per kilogram of owner milk – was 39.7 eurocent ($0.45) in 2021 compared to 36.5 eurocent ($0.42) in 2020.

Arla’s farmer owners were again challenged throughout 2021 due to rising costs and additional sustainability requirements on their farms. Arla maintained a pre-paid milk price that increased by 23% throughout the year.

“2021 was a tough year on farms as both our members and company were impacted by the continued effects of the pandemic and rapidly rising production costs. As such, I am proud that our company has been able to deliver a performance price that puts Arla among the market leaders in Europe and that supports our farmer owners. Thanks to the dedicated efforts of farmers, employees and management, we successfully navigated this challenging environment and secured a high value for our milk,”​ said Arla Foods chairman, Jan Toft Nørgaard.

At a global level, Arla’s business benefited from the strong demand for dairy around the world. Arla Europe delivered an overall branded volume driven growth of 2.3%, while Arla’s international business unit delivered 9.1% growth. More of Arla’s milk was also directed into the company’s global ingredients business, which grew by 14.5% in 2021.

"Our strategic brands performed exceptionally well in 2021 as consumer appetite for high quality, natural nutritious dairy products remained strong around the world. Month on month, we managed sales and operations firmly to maintain product availability amidst fluctuating demand between in-home consumption, dining out and on-the-go as lockdowns eased and we returned to the workplace,”​ said Arla Foods CEO, Peder Tuborgh.  

Arla said it expects inflation and volatility to continue to impact the business and other sectors well into 2022.

“The impact on consumer behavior of on-going market volatility and high inflation will be multifaceted and difficult to predict. It is likely that we will see a slowdown in our branded growth as the market resettles at a new level. Our cooperative stands on a solid foundation and as we have demonstrated in 2020 and 2021, we will continue our strong operational execution throughout our supply chain to meet any new demands and requirements in this uncertain environment,”​ Tuborgh said.

Arla Group revenue outlook for 2022 is expected to be €11.8bn-€12.4bn ($13.5bn to $14.2bn), net profit share will be in the range of 2.8 to 3.2% and leverage is expected to be in the target range of 2.5-2.9.

Arla will publish its full annual report on February 24 following the company’s board of representatives meeting.

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