New strategy to take Arla into the next decade
Arla has more raw milk in its care than ever before and more expected over the next five years, and this provides the business with opportunities for global growth to create value for its 12,700 farmer owners.
Unveiling its new Strategy 2020, Arla is setting out to grow its business in six regions around the world and eight global dairy categories, as the company moves towards 2020 as one effective and unified cooperative.
Since 2007 Arla’s milk volume has grown from eight billion kilos to 14 billion kilos through mergers and, since April 2015, through organic growth in the milk production of Arla’s farmer owners as EU milk quotas no longer exist. It is anticipated that Arla’s farmers will grow their milk production by another 2.5 billion kilos by 2020, giving Arla more growth opportunities than ever before.
In the new group strategy Good Growth 2020, Arla’s Board of Directors and executive management is laying out the direction for Arla’s business in the coming five years to create maximum value for the increased volume of milk:
- By excelling in eight dairy categories
- By focusing on six regions
- By winning as one efficient Arla
“We are launching a new strategy. However it is not a radical change of direction for Arla. Over the past years we have prepared for this moment by expanding our size and our competencies. In Strategy 2020 we will focus even more on organic growth and growing our brands through innovation that focuses on what consumers and customers want and need. This will help us create the most profitable growth with our farmer owners’ milk,” says CEO of Arla Foods, Peder Tuborgh.
Excel in eight dairy categories
Consumers around the world are looking for ways to make their everyday lives healthier. Arla has now identified eight product categories that will be the central focus for the company’s efforts to shape the dairy market by offering new products with natural ingredients, great taste and good nutrients that make it easier to live a healthy life.
“The global dairy industry has developed by a speed seldom seen before, with millions of consumers changing their daily habits and preferences. We have analysed consumer needs and trends across dairy categories worldwide and have matched this with our own biggest strengths. This has led us to pursue eight specific categories where we feel Arla can grow a leading position globally or regionally. Our strategic innovation and best resources will be poured into these categories,” says Peder Tuborgh.
The eight prioritised product categories are:
Butter and spreads: Be global leader in butter and spreads with world class products made from natural ingredients
Spreadable Cheese: Lead in cream cheese made from natural ingredients and high quality processed cream cheese
Speciality Cheese: Be leading player in speciality cheese with creatively crafted products and concepts
Milk-based beverages: Shape market for nutritious milk-based beverages made from natural ingredients for people on the go
Yogurt: Innovate to build a strong ‘natural goodness’ position for yogurts
Milk and powder: Lead and shape the milk and powder market with nutritious value-added and cost-competitive products.
Mozzarella: Build global mozzarella position with high quality and cost-competitive products
Ingredients: Be the global leader in value-added whey
Arla will pursue growth in these eight categories primarily through its three global brands of Arla® (natural goodness), Lurpak® (good food deserves Lurpak) and Castello® (creatively crafted).
Focusing on six regions
Over the years Arla has built a strong position in Northern Europe and the Middle East, where Arla is the preferred dairy company for consumers and where Arla’s brands are among the strongest in the food industry. In that same period, Arla has also begun to build a business in new growth markets such as China, sub-Saharan Africa and Russia.
Arla will continue to build on these market positions as it focuses its growth ambitions on the following six markets: Europe, the Middle East, China, Russia, Nigeria and the USA. In Europe, Arla’s lead markets are the UK, Sweden, Denmark and Germany.
“We have identified the markets in which Arla has the biggest potential to grow a long-term profitable business for our farmer owners. We are stepping up our efforts in the United States and Nigeria, while continuing to build on our positions in Europe, the Middle East and China. We also remain hopeful that Russia will re-open for business, at which point it will still be a very attractive market for Arla,” says Peder Tuborgh.
“We are not pulling out of any markets that are not mentioned, but we will focus our innovation, investments and competences on those lead markets. Over the coming five years we expect about half of our growth to come from outside the EU as we grow market shares while the other half will come from within the EU as we grow in key categories and add value through innovation,” he adds.
Winning as one efficient Arla
Over the past five years Arla grew significantly in Europe with no less than six mergers in Central Europe, the UK and Sweden and the past few years have been spent aligning the different companies into one and harvesting the synergies that the mergers created. In Strategy 2020 Arla will now take this unity to the next level.
“We are a different company to the one we once were. The last few years have prepared Arla to take the role of an international food company, and the benefits will be reaped over the coming years. Our entire supply chain is more efficient as we have established one European milk pool to ensure a more holistic use of our milk across the Arla group. You will see our branding and marketing becoming more global, improving the spend effectiveness, and you will see Arla driving more radical innovation across borders,” says Peder Tuborgh.
“Over recent years we have grown mostly through mergers and acquisitions that provided us with more owner milk, strong production sites, product competencies and market positions. Now, after the abolition of the EU milk quotas, our farmer owner’s supply of raw milk is growing organically just as we expected. This gives Arla opportunities to create new growth for our farmer owners, and that is our mission as a company. That is what Good Growth 2020 is all about,” says Åke Hantoft, chairman of the Board of Directors.