DENMARK – Continued inflationary pressure, declining dairy commodity prices, and shifting consumer preferences have marked the first half of 2023 for Danish dairy giant, Arla Foods.
Despite these challenges, the dairy cooperative managed to achieve a significant milestone with a reported revenue of US$8.6 billion for the first half of the year, reflecting a remarkable 10.7% increase compared to the same period in 2022.
The fluctuating economic landscape, characterized by persistent inflation and changing consumer behaviors, posed significant hurdles for Arla Foods in the first half of 2023.
However, the company’s strategic moves to address these challenges have paid off, driving an impressive revenue growth.
A key driver of this success was the implementation of earlier price increases across Arla’s retail and foodservice sectors, which played a pivotal role in bolstering the group’s financial performance.
While the overall branded revenue grew by 6.9%, the standout performers were the Lurpak brand, which achieved a 7.2% growth, and the Arla brand, which witnessed a 3.6% increase.
This underscore the resilience of Arla’s established brands even in the face of adverse market conditions.
CEO Peder Tuborgh expressed satisfaction with the company’s ability to navigate these challenges, highlighting the safeguarding of market share and the successful delivery of competitive returns to their farmer owners.
The cooperative managed to provide a half-year supplementary payment to their farmer owners, amounting to 1 Euro-cent/kg milk based on the half-year volumes as initially planned.
A significant factor impacting Arla’s financials was the decrease in dairy commodity prices, which in turn affected milk prices.
Despite this challenge, Arla managed to keep its average pre-paid milk price at 48.2 euro-cent/kg in the first half of 2023. This strategic balancing act aimed to address both the increasing milk production and the evolving consumer spending patterns.
The company’s brand performance took a hit due to changing consumer preferences, leading to a -6.0% decline in strategic branded volume growth for the first half of the year.
Arla’s CFO, Torben Dahl Nyholm, attributed this decline to the ongoing inflationary pressure, pushing consumers towards discount channels and private label products.
Despite these challenges, some of Arla’s strategic investments paid off handsomely. The Starbucks business witnessed a growth of 21.6%, while ArlaProtein experienced a remarkable 51.6% growth in branded volumes.
Other brands, like Starbucks and Puck spreadable cream cheese, also managed to achieve a growth rate of 3.3% in branded volumes.
Arla’s foodservice business experienced a contrasting scenario, with a volume growth of -1.8% in the first half of 2023, compared to the exceptional 19.0% growth witnessed in the same period last year due to COVID-19 lockdown rebounds.
In addition, Arla Foods Ingredients, a subsidiary of Arla, demonstrated robust performance, increasing its revenue by 10.8% to US$604.34 million.
The growth was fueled by a 5.2% increase in value-added whey protein product volumes, showcasing the company’s ability to adapt to market trends and capitalize on shifting consumer demands.
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