2007 sees good business performance for Arla Foods

Arla Foods amba has announced strong annual global results for 2007 with profits amounting to £94.8 million (DKK 938 million) which are slightly up on 2006

The implementation of price increases across all markets enabled the company to pay £120 million (DKK 1.2 billion) to its Scandinavian co-operative members during a year of unprecedented change in milk sourcing and global demand for milk. The resulting competition for milk during the autumn of 2007 led to some farmers leaving the cooperative but some have now returned. 

Factors positively affecting the annual results include the integration of Arla Foods UK as well as Tholstrup Cheese in Denmark and Arla Ingman in Finland. General efficiency measures across the group also contributed. 

Arla Foods amba’s 2007 turnover totalled £4.8 billion (DKK 47.7 billion), £220 million (2.2 DKK billion) more than the previous year. 

Arla UK’s performance
In the UK, Arla is performing well, in line with expectations. Following the acquisition of 100 per cent control of Arla Foods UK in April, a new leadership team was appointed and a new vision, strategy and set of values have been agreed for the UK business. 

In addition to this significant piece of work, we have continued to strengthen our relationships with our customers, increased the value of our leading dairy brands and met significant environment performance targets.

Working in partnership with our customers
We were proud to once again be recognised by our customers in the 2007 Grocer Gold Awards where we took the award for best overall own label supplier for the third time in the last four years. 

This award was in addition to Arla taking first place, for the fourth time, in the own label dairy supplier category and branded dairy and yellow fats category for the first time.

These achievements reflect our commitment to building strong relationships with our customers and we particularly value these awards because they are voted for by our customers.

Strengthening our farmer relationship
In 2007 we paid an additional £35 million to UK farmers supplying Arla Foods Milk Partnership in milk price increases throughout the year, excluding retailer contracts, which, if we compare the average Arla Foods milk price in January 2007 with January 2008, equates to a milk price increase of 6.65ppl in the past year.

Working closely with our supplying farmers is a key priority. Currently, Arla Foods amba is in talks with Arla Foods Milk Partnership about potentially becoming part-owners of the UK business. 

Successful brands
It has been a very successful year for our leading dairy brands. In June, Lurpak overtook Flora to become the UK’s number one butter, spreads and margarine brand and, in December, Cravendale broke through the £100m sales barrier and is currently the second fastest growing grocery brand in the country.

Lactofree is growing by 140 per cent year on year and Anchor, which has also broken through the £100m sales barrier, launched its new free-range campaign and is growing at six per cent year on year. 

We have also successfully launched a new cheese brand, Castello, which benefited from national television advertising before Christmas and our Apetina cheese brand is performing very well, growing at over 60 per cent year on year.

Investing in facilities
Following significant investment, we are now supplying UK soured cream to our own label customers and have guaranteed new listings for UK crème fraiche. We consider these to be growth areas and look forward to developing them in the future.

Across all of our sites we have invested to improve efficiency and achieve cost leadership in fresh milk and this focus will remain a key priority throughout 2008.

Environmental performance
We began 2008 with energy efficiency accreditation from The Carbon Trust and we are the first UK dairy company to receive this standard. All of our sites have gained ISO 14001 and OHSAS 18001 certifications, another dairy industry first. 

We are committed to minimising our impact on the environment and, during 2007, made significant progress in reducing our energy consumption and carbon dioxide emissions by 16 per cent, water by over 20 per cent, in addition to reducing the amount of waste we send to landfill by over 51 per cent. Recycling is central to our environmental strategy and across our nine processing sites we are now recycling, on average, 83 per cent of the total waste generated. Almost half of these sites are already recycling over 90 per cent of their total waste, which is our aim for all our nine sites.

Award winning
Right across the supply chain, we have been recognised for our high standards cumulating in Arla being named Food Manufacture magazine’s Company of the Year 2007.

Our brands have also picked up a string of accolades including Lurpak winning The Grocer magazine’s 2008 Branded Excellence Award in the BSM category, our Arla branded milk packaging taking the title of Product of the Year in the milk category and Lactofree being crowned The Grocer magazine’s star product in June and winning the SWOT award for best product launch marketing strategy.

Inflationary pressure
Despite good company performance, the increasing price of plastic, oil and diesel is a concern. The Platts Resin index and diesel price were at a record high in January, which has a considerable impact on our costs. The commodity and currency markets remain volatile and we anticipate that this will continue throughout the first quarter of 2008.

Looking ahead
The integration of Arla Foods UK into the Arla Foods amba group is progressing well and, as one global company, we have many exciting new opportunities to exploit together.