Boycott cost each co-operative member DKK 40,000

The cost to Arla Foods of the boycott of Danish products in the Middle East amounts to approx. DKK 400 million for 2006. This equates to a loss of DKK 40,000 for each of Arla’s 10,000 Danish and Swedish co-operative members.

The loss from the boycott corresponds to Arla’s forecast from March in 2006 when sales of Danish butter, cheese and other dairy products had been at a standstill for one month.

”This has been a tough time for everyone at Arla Foods involved in our Middle East business,” says Divisional Director Finn Hansen, Arla Foods. “But nevertheless, it’s a relief that the boycott of our dairy products has come to an end. The religious and culturally conditioned agenda has now been superseded by commercial pressures where we’re facing stronger competition from other dairy companies.”

Arla’s ambition early in the year was to recover 50% of Middle Eastern sales before the end of the year. This target has already been achieved in that turnover has now reached 60%. One of the explanations, however, is that many products have been sold at discounted prices.

”In the spring, sales were so sluggish that it proved necessary to launch a number of campaigns that offered cheap butter and cheese during the summer,” says Finn Hansen. “At the same time, our stocks were approaching their sell-by date. We’re now back to selling our fresh products at the normal price and it will be interesting to see to what extent we can sustain sales.”

Finn Hansen expects Arla’s sales to rise during the coming year and that by the end of 2007, sales will have reached pre-boycott levels. If this proves to be the case, the boycott will have pushed back Arla’s development in the Middle East two years.

Note: DKK 1 is approx. USD 0.17.