Arla Foods delivers $15b revenue as Co-op turns 25
European dairy giant Arla Foods celebrated its 25th anniversary as a cross-border, farmer-owned co-operative with a solid half-year result.
It has also announced a new executive management team and greater commercial and consumer focus.
Arla says it will adopt more globalised supporting functions such as supply chain, finance and HR, reducing duplication across countries.
Chief executive Peder Tuborgh says it has grown its business significantly in recent years, organically and via mergers. However, more milk is being produced globally and Europe is experiencing pressure on prices and very little growth, which makes competition is fierce.
"In addition, consumer needs are becoming more diverse and our customers expect increasing levels of service. So we need to be more agile and cost efficient to remain competitive. In order to remain at the top of their preferred partners list we must change the ways we work."
The co-op has a new executive management team (EMT) of seven – down from nine. Marketing and innovation have more emphasis, to achieve global brand growth and category leadership.
Two commercial areas are formed in the EMT – Europe and international – leaving country managements to get busy with customers, consumers and categories.
Arla will now have one global supply chain and one global milk pool; 500 of 7000 monthly-salary roles will be discontinued. In-market teams will go for a "more commercial approach" with strong marketing support driven from a global category perspective, says Tuborgh.
One global supply chain organisation will be created, and functions like finance and hr will be centralised.
Arla aims to increase organic revenue growth from 2% to at least 4% by 2020 – "a fundamental change for the company," Tuborgh says. "For many years Arla has grown mainly by cooperative mergers where the new milk already had a position in the market. Our continued success depends on increasing the value and developing profitable positions for the growing milk volumes coming in now from our existing farmer-owners. We need to act local and think global and the new organisation reflects this."
No slackening the pace
With the new structure, Arla can more effectively allocate its global pool of raw milk to pursue strategic opportunities that will deliver the greatest returns for farmer-owners' milk, says chief executive Peder Tuborgh.
"Also, it can more effectively develop its global categories, build its global brands and launch new products across the regions.
"As we have a huge task in 2016 to create profitable positions for extra 600 million kgMS and protect Arla's performance, I expect we will have our full organisation in place without losing speed in the process."
Arla's directors support the proposed changes.
