Arla’s focus moves outside EU when quotas end

Over the next five years Arla will increase its focus on Russia, China and the Middle East & Africa region and aims to double sales of ingredients to the food industry, according to the company. On Arla’s core markets in Northern Europe the main focus will move from expansion to increased profitability and innovation. The  revised strategy launched by Arla’s executive management group is that Arla is increasing its strategic focus on markets outside of the EU. In these markets, millions of people have achieved a better standard of living and are demanding healthy and safe food products.

”We now increase our focus on Russia, China and the Middle East and Africa region. Our export to these markets is growing rapidly, and we will work hard over the next five years to build on the massive potential that these markets hold for Arla’s products,” says CEO of Arla Foods, Peder Tuborgh (pictured).

Defining Russia, China, 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 3.5 to 10 billion DKK (€460m-1.3bn).

The abolition of EU milk quotas in 2015 is the main driver behind the decision to revise and extend the global strategy despite of there being three years remaining for the current strategy. 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.

“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,” says Åke Hantoft, chairman of the board of directors.

In recent years, Arla has strengthened its positions in its core markets in the UK, Sweden, Germany, Denmark, Finland, and the Netherlands. According to Strategy 2017, these markets must continue to be developed, but with more focus on refining activities, not primarily through expansion via mergers and acquisitions.

Ingredients is another area where Arla hopes to double its revenue by 2017 to more than DKK5 billion (€670m). The firm also expects to implement cost efficiencies and savings.

”We are four years into the 2015 strategy period and have achieved many of the strategy’s objectives, and are close to the revenue target of 75 billion DKK. Our recent growth must deliver an even higher return to our cooperative owners, and releasing Arla’s new potential is a major task. This is one of the main elements in Strategy 2017. Even though revenue will naturally increase during the next five years, the main goal is profitability,” says Tuborgh.