2009 Annual Report is now available
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- 7 min
- 04 March 2010
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Arla Foods reviews a turbulent and challenging year in its 2009 Annual Report, including how Arla’s core markets developed during the year.
”Last year will be remembered as the year of the global recession and a very tough year for the whole dairy industry. However, I believe that we have come through these difficulties in a strong position. It is, nevertheless, disappointing that we we were not able to offer our owners a higher milk price.”
This is how CEO Peder Tuborgh summarises 2009 in Arla’s latest Annual Report published today. In addition to the accounts, the report reviews developments in all Arla’s core markets and describes the moves to secure a better milk price for co-operative owners in Denmark and Sweden.
”In a year when the whole of the dairy industry was under huge pressure from the recession, I am pleased that Arla Foods 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 now stands firm as a strong and healthy business. This is all positive. The milk price paid to our owners, however, remains a key issue and we did not perform well enough in this area in 2009. The price level that we’re currently seeing for Europe’s milk producers is just not sustainable going forward,” says Peder Tuborgh.
Read more about our core markets below:
- UK – Brands that lead the way
- Sweden – Going nationwide
- Denmark – Consumers follow discount trend
- Finland – The growth continues
- Germany – Brand building pays off
- The Netherlands – Success from day one
- Poland – A market with great potential
UK – Brands that lead the way
Arla’s biggest single market continues to be the UK, which made up 26,2% of the company’s total turnover in 2009. Arla’s key brands in the UK - Lurpak, Cravendale and Anchor - continued to perform well despite the recession and the Lactofree brand grew by 41 per cent.
”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 the announcement of our plans for a new one billion litre dairy has sent out a clear signal to the industry that we are committed to delivering our strategy for growth,” says Executive Vice President of Arla UK, Peter Lauritzen.
Click here to read more about Arla’s UK business and its performance in 2009.
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Sweden – Going nationwide
Arla’s turnover in Sweden represents 20 per cent of the company’s total turnover. Adjusted for the restructuring of the Swedish juice business, Arla in Sweden is experiencing increasing sales, but a weaker currency during 2009 had a negative impact on turnover.
”Arla’s whole product range is now available in all parts of the country, and the inspiration this provides, our organic products and the overall broad assortment is valued by consumers. All our categories are characterised by high demand for natural products, which is a positive trend for Arla,” says Christer Åberg, Senior Vice President of Arla Foods Sweden.
The market has been stable despite the economic crisis in 2009. However, there has been a price pressure from customers, driven by the international market development as well as a trend towards private label and discount products. Overall, Arla gained market shares and now has an overall share of 45 per cent of the Swedish dairy market.
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Denmark – Consumers follow discount trend
18.6% of Arla Foods’ total turnover in 2009 was generated in the Danish market. Here, the year was characterised by the global recession, which caused many consumers to opt for discount products instead of brands.
”2009 was a difficult year in the Danish market for dairy products,” says Lars Aagaard, Arla Foods’ Director for the Danish Market. “We clearly felt the effects of the extremely cautious approach of many consumers. Price was more important than quality – particularly in respect of fresh milk – and more expensive brands were dropped in favour cheaper discount products.”
Lars Aagaard, however, points out that the recession did not mean that consumers bought fewer dairy products in 2009, but rather that many switched to discount ranges. Towards the end of the year, indications were that consumers were starting to show renewed interest in branded products.
”We started to see signs of recovery during the last two to three months of the year when organic products and other branded products started to show a slow but sure upturn in sales. On this basis, we’re leaving 2009 behind with a sense of optimism about consumers’ growing focus on quality rather than price,” says Lars Aagaard.
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Finland – The growth continues
The global economic crisis and the decline in consumer spending also impacted on Arla Ingman’s sales. Domestic cheese and yoghurt saw the strongest falls whereas sales of fresh milk increased. Despite the pressure on food prices, Arla Ingman’s sales volumes recorded a 12 per cent rise in 2009.
”Despite the difficult economic situation, our turnover increased and our market position strengthened. Pressure on food prices, however, intensified and we’re continuing to streamline our operations to maintain competitiveness and profitability," says Arla Ingman’s Managing Director Robert Ingman.
Arla Ingman made up 5.1% of Arla’s total net turnover and sourced 204.1 million litres of milk from their own and partner suppliers, i.e. 15.1 million litres more than in 2008. Most of the increase derives from a new dairy that began delivering milk to Arla Ingman in early 2009.
The outlook is for a challenging market in 2010 and for tougher competition within the dairy sector. The intense price pressure on food products makes the situation even more challenging. Arla Ingman’s main objective in 2010 is to raise productivity and maintain profitability.
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Germany – Brand building pays off
Despite of a tough retail climate in Germany especially during the last half of the year, Arla succeeded in increasing its sales volumes on the German market in 2009. The market made up 6,5% of Arla’s total net turnover in 2009.
”Although prices for own label products came under particular pressure, 2009 reaffirmed the positions of brands such as Kærgården and Buko in the German market. Sales of these brands rose again despite the economic crisis and consequently contributed to an excellent result for us in Germany,” says Executive Vice President in Arla Foods’ Consumer International, Tim Ørting Jørgensen.
Having recently been singled out as a strategic core market in Arla Foods, Germany remains an essential part in Arla’s plans for European growth.
”Our ambitions for Germany remain intact. We are in the process of assessing the best options for Arla to increase its activities and presence on the German market, either through local partnerships, potential mergers or acquisitions. This work will continue in 2010,” says Tim Ørting Jørgensen.
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The Netherlands – Success from day one
Last year Arla acquired the dairy plant in Nijkerk from Friesland Campina with effect from early May. Since then, Arla’s business in the Netherlands grew to reach 3,2% of the company’s total net turnover.
”Our new colleagues in the Netherlands have delivered a fantastic result, going well above our internal forecasts for 2009. The integration of the Nijkerk business is well underway, and we are pleased to see that the business is making a positive return on Arla’s investment from day one – just as we had anticipated,” says Executive Vice President in Arla Foods’ Consumer International, Tim Ørting Jørgensen.
With many effeciency and synergy benefits created as a result of combining Arla’s preexisting import business in the Netherlands with the newly-acquired local production, it is expected that the positive development for Arla in the Netherlands will continue in 2010.
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Poland – A market with great potential
With 0,5% of Arla’s total net turnover in 2009, Poland is not yet a major market on the company’s world map. However, the Polish market remains a strategic core market for Arla through its potential for increased Arla activities in the country that has 38 million consumers.
”In 2009 we put our structural discussions for Poland on hold in order to focus on growing our market position in key categories. In 2010 we will refocus our efforts to find new opportunities for Arla to increase its presence on the Polish market. Our search for strategic business partners will continue,” says Executive Vice President in Arla Foods’ Consumer International, Tim Ørting Jørgensen.
In the meantime Arla is pleased to see one of its main brands – Lurpak – perform with great success on the Polish market. In early March of 2009, Lurpak butter was introduced on the Polish market, and sales reached more than 1200 tons in a year that also saw Arla’s cream cheese and white cheese products perform well in Poland.
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Arla Foods is an international dairy company owned by 9,700 farmers from Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands. Arla Foods is one of the leading players in the international dairy arena with well-known brands like Arla®, Lurpak®, Puck® and Castello®. Arla Foods is focused on providing good dairy nourishment from sustainable farming and operations and is also the world's largest manufacturer of organic dairy products.