The co-op aims to double sales of ingredients to the growing food industry outside the EU. At the same time, the focus in Northern Europe moves from expansion to increased profitability and innovation.
The strategy change is similar to Fonterra’s strategy refresh unveiled last year. Fonterra is setting up more dairy farms in China and boosting production capability in Asia and the Middle East.
Arla notes in markets outside the EU, millions of people have achieved a better standard of living and are demanding healthy and safe food products.
Arla Foods chief executive Peder Tuborgh says its exports to Russia, China and the Middle East & Africa region are growing rapidly.
“We will work hard over the next five years to build on the massive potential that these markets hold for Arla’s products,” he says.
Defining Russia, China and the Middle East & Africa as strategic growth markets will see Arla increase investment in marketing, distribution networks and cooperation with local partners in these markets between now and 2017. By 2017 the overall revenue from Arla’s strategic business generated in these markets is set to increase from approximately $760 million to $2.1 billion.
The revised strategy is linked to the abolition of EU milk quotas in 2015.
Without EU quotas it is anticipated that Arla’s milk farmers will produce at least one billion kilos of milk more each year than today. The extra milk cannot be sold as profitable products in the EU due to growth stagnating, it says.
“We have an opportunity to achieve profitable long-term positions in markets outside the EU, and therefore it is important that the strategy sends a clear signal to the organisation that we need to further develop our sales channels.
“Our dairy products need to reach many new consumers as these increased global sales will help to maintain a viable dairy business in northern Europe,”
In recent years, Arla has strengthened its positions in its core markets in the UK, Sweden, Germany, Denmark, Finland, and the Netherlands. According to its Strategy 2017, these markets must continue to be developed, but with more focus on refining activities, not primarily through expansion via mergers and acquisitions. Tuborgh says Arla has a lot of unutilised potential that must be put to good use.
“We can do this by further advancing our relations with customers and consumers, offering more attractive products, and finding new ways to inspire our customers. We will continue to focus on the three global brands of Arla, Lurpak og Castello, which must all grow via their individual unique profiles.”
