The global recession has impacted on the entire dairy industry, however, Arla Foods amba’s successful cost reduction programme and a rise in the price for bulk industrial products at the latter end of the year resulted in the company’s 2009 profit totalling DKK 971 million, DKK 71 million higher than budget, exceeding the expectations of the business.
Despite profit being ahead of expectations, Arla Foods amba’s turnover fell by DKK 3.2 billion to DKK 46.2 billion as customers and consumers reacted to the global recession, purchasing fewer and lower priced dairy products.
The impact of the recession was compounded by prices on the global dairy market decreasing dramatically at the start of 2009 and weak exchange rates for Swedish kroner and British sterling. These currencies, which fell significantly against the Danish kroner and the euro, form a substantial part of the Group’s turnover.
“In a year when the whole of the dairy industry was under huge pressure from the recession, I am pleased that Arla Foods amba fully exploited the earnings potential that, despite the current situation, exists in our markets. As we adhered to our strategy and streamlined and developed our core markets, Arla Foods amba now stands firm as a strong and healthy business,” said Peder Tuborgh, CEO Arla Foods amba.
UK overview
During 2009 we achieved a turnover of £1.5 billion and our key brands - Lurpak, Cravendale and Anchor - continued to perform well and our Lactofree brand grew by 41 per cent. We intend to increase our share of the branded milk and BSM categories in 2010 and will be investing £35 million in marketing activities for our top four brands.
We have made significant gains within our own label business. As well as increasing our supply of fresh and organic milk and cream to Tesco by 20 per cent we retained 100 per cent sole supply of Asda’s fresh milk, UHT and cream. We have also recently secured a new fresh milk contract with Sainsbury’s. During the adverse weather at the beginning of the year our excellent service levels were recognised by our key retail customers.
We have made good progress against our strategy of sourcing 90 per cent of our raw milk from Arla Foods Milk Partnership. Following the demise of Dairy Farmers of Britain, we selectively recruited farmers and our strategic recruitment campaign is ongoing.
Operationally, 2009 was a landmark year. In January we announced the £70 million expansion of our dairy at Stourton, Leeds and this is progressing to plan with fresh cream production on schedule for commercial production this week. The expansion at Stourton dairy will also see us manufacture cottage cheese for the first time in the UK. In November, we publicised our plans to construct a one billion litre dairy on the outskirts of London. It will be the most efficient and environmentally advanced in the world and we are currently finalising the land search. We also commissioned two new filling lines, one for fresh milk at our dairy in Lockerbie and another for UHT milk at Settle creamery.
We have made excellent progress against our environmental targets in 2009. We succeeded in producing the UK’s lightest two pint polybottle for milk and have now successfully incorporated 10 per cent recycled plastic into our own label polybottles. In January we announced that we are investigating the possibility of piloting HDPE derived from sugar cane and we are the first dairy to collaborate with the Freight Transport Association on its Logistics Carbon Reduction Scheme to drive down greenhouse gas emissions within our logistics operations.
Commenting on 2009, Peter Lauritzen, CEO of Arla UK, said: “There is no doubt that 2009 was a challenging year for the business but we still made good progress. The UK is a core market for Arla and we have begun planning our new one billion litre dairy, which has sent out a clear signal to the industry that we are committed to delivering our strategy for growth.
“We have exciting plans for our brands in 2010 and, following a successful LEAN pilot on our Stourton campus, we are confident of generating further efficiencies within our supply chain as we roll out this way of working throughout the business.
“We remain committed to reducing our environmental impact and are working towards delivering our ambitious carbon reduction strategy.”
Please click here to view the 2009 annual report.