The Arla Foods amba Board of Directors, and the board of Milk Partnership Limited, Arla Foods Milk Partnership’s (AFMP) investment company of which all AFMP farmers are members, have announced the proposal for the roadmap to co-ownership. This could see a further 1,600 British dairy farmers become co-owners of Arla Foods amba, one of Europe’s leading dairy cooperatives.
At the same time, the boards of Arla Milk Link and Arla Foods amba have announced positive changes to the Arla Milk Link merger conditions.
The two proposals, which further strengthen Arla’s cooperative status in the UK, could raise the number of British dairy farmer owners to 3,200, who will all benefit from Arla’s overall objective of providing its dairy farmer owners with a more sustainable future.
Arla Milk Link receive supplementary (13th) payment
to With effect from 1 January 2014, Arla Milk Link members will receive Arla Foods amba’s supplementary (13th) payment, two years ahead of schedule. The first payment will be received early in 2015 on milk supplied during 2014. The supplementary (13th) payment is an additional annual payment of the global company’s profit, paid out on a pence per litre basis, after the year end, usually in March.
Commenting on the proposal, Johnnie Russell, Director of Arla Milk Link and Arla Foods amba, said: “This is an extremely important milestone for the development of Arla’s business in the UK. The original agreement with Milk Link, which allowed for a three and a half year transition period to full membership, was negotiated on the basis of a historic performance price gap which does not currently exist, given the strong business performance in the UK since the merger in 2012.
“This will be welcome news for Arla Milk Link farmers and further emphasises the benefits of Arla amba membership,” he added.
Milk Partnership Limited to become owners of Arla Foods amba
Milk Partnership Limited (MPL) will become a corporate member and co-owner of Arla Foods amba, with effect from 1 January 2014, with farmers who elect to join receiving the same membership rights as the existing 12,250 farmer owners, including Arla Milk Link farmers.
All existing suppliers of AFMP, Arla direct, and Arla Milk Link direct will be invited to take up the offer of ownership. AFMP farmers not wishing to take up the offer will have the option to transfer to an Arla direct contract.
From 1 January 2014, MPL farmers will receive the Arla Foods performance price, which includes the amba standard litre price, plus a supplementary (13th) payment, and will benefit from individual consolidation and collective (common) consolidation.
How the MPL offer works
In consideration of full corporate membership, MPL will contribute 7.5ppl to Arla Foods amba. However, this contribution is relatively cash flow neutral because:
- It will be paid from money MPL members have already invested in the cooperative.
- It will be funded via a bank loan sourced through MPL (not a loan sourced by the individual farmer) paid back via an investment levy of 0.5ppl for two years. The existing MPL levy will cease on 31 December 2013.
- The balance will be paid from the supplementary (13th) payment and consolidation.
Speaking about the proposal, Jonathan Ovens, Chairman of MPL and AFMP, commented: “One of the founding principles of AFMP was to secure a home for every litre of members’ milk and we are delivering on this aim. I’m delighted that we have agreed the terms of the roadmap which offer circa 1,600 farmers the benefit of joining a major European cooperative that consistently pays one of the highest milk prices and a share of the profits. This move takes our ambition to the next level by providing the security of a milk price determined by European and world markets, from a well-balanced, well-invested, farmer-owned business, which has access to the global marketplace and operates across all dairy categories.
“Quite simply, Arla Foods amba is owned by farmers and run for the benefit of farmers. There is a natural alignment of our interests with the existing dairy farmers owners. I will be joining and I hope that fellow members will choose to join too,” he added.
MPL members will receive a detailed information pack and a series of roadshows is being held across the country to enable them to learn more about the proposals and the benefits. Both proposals require the approval of Arla Foods amba’s Board of Representatives on 9/10 October. MPL members will vote for MPL to become a cooperative at an all-member meeting on 30 October.
Current Arla farmers have until 15 November to confirm their intention. Should the offer be undersubscribed, it will be opened up to British dairy farmers, who currently do not supply Arla Foods, who are invited to register their interest with Arla Foods UK.
NOTES TO EDITORS
Conversion to cooperative status
If the proposal is approved, MPL members will receive the equivalent membership rights in Arla Foods amba as their fellow dairy farmer owners. MPL will convert to a cooperative and change its name to Arla Milk Cooperative (AMCo). Farmers who sign a new milk supply contract will be part of the cooperative, which will become a corporate member and owner of Arla Foods amba.
To represent AMCo’s members’ interests, and allow them to positively influence the growth of the cooperative, AMCo (the corporate member) will, on 1 January 2014, be entitled to have one farmer elected director on the Arla Foods amba Board of Directors and at least seven representatives on the Arla Foods amba Board of Representatives, dependent on the volume of milk supplied by AMCo.
Collective consolidation is the proportion of profit retained by Arla Foods amba to finance growth and development.
Individual consolidation represents a member’s investment in the business. It is paid out in instalments if a member leaves the cooperative.
Arla Foods amba is Europe’s largest dairy cooperative and the world’s sixth largest dairy company. It has leading dairy brands, 12,250 dairy farmer owners, and access to world markets and all dairy categories.
1,600 of the 12,250 owners are British, rising to circa 3,200 from 1 January 2014.
In the UK, Arla is the number one dairy company with a turnover of circa £2.1 billion, a milk pool of 3.2 billion litres and 13 production and packing sites. It is the UK’s number one in fresh liquid milk, butter and spreads and dairy ingredients and the UK’s largest cheese manufacturer. Its major UK brands – Lurpak, Anchor and Cravendale – are all ranked among the top 100 grocery brands in the UK.
Arla UK farmers
- 1,600 Arla Milk Link owners
- 1,300 AFMP suppliers
- 300 direct suppliers (Arla and AML)
Arla Foods UK plc is home to some of the UK’s leading dairy brands including Cravendale, Lurpak, Tickler and Anchor. Processing approximately 3.2 billion litres of milk a year and with a turnover of approximatey £2bn Arla is the UK’s largest dairy company.
Over 4,000 daily deliveries are made to stores and regional distribution centres nationwide, Arla's brands can be found across the dairy category and the company has a 26 per cent share of the GB milk pool. Behind this leading business is a team of circa 4,000 people across the UK located at our dairies, distribution centres and head office.