Revenues At Arla Foods UK Slip But Core Brands Performing Well

Arla Foods has revealed that its overall revenue in the UK decreased from €2.5bn in 2015 to €2.2bn in 2016, impacted by lower global market prices and unfavourable exchange rates. However, its branded portfolio performed strongly, boosted by recent product innovation of its core Arla, Lurpak and Castello lines, with it increasing its market share across most of its categories.

Overall, the group said Arla branded products achieved volume driven growth of 7.6% compared to 5.2% in 2015. Its Arla branded milk grew 12%, and added £95m to the milk category.  This was supported by the launches of Arla B.O.B6, Arla Farmers Milk, Arla Organic Farm Milk and its ‘on the go’ line, Arla Cravendale 250ml.

The group’s Arla Lactofree product range achieved another year of double digit growth with volumes up 18% growth (23% in 2015). Meanwhile, the Arla yogurt category, which the business first entered in 2015, more than doubled year-on-year (+116%) due to the success of its Arla skyr and Arla Protein lines.

Meanwhile, Arla’s speciality cheese brand Castello accelerated its growth in 2016 to 18%, driven by the success of its Castello Tickler Cheddar.  Arla also produces own label cheese for most of the major UK retailers with its overall cheese business growing 5.1% (2.8% in 2015).

The group stressed that Lurpak (+4.9%) and Anchor (-3%) continued to outperform the market in value and volume in a category that is in decline. It said that consumers were continuing to move towards more natural products, benefiting Lurpak and Anchor who maintain their number 1 and 3 positions.

Tomas Pietrangeli, Managing Director, Arla Foods UK, commented: “In a year of continuing changes in the grocery market as well as political uncertainty, we were able to deliver a strong set of results by driving growth in the UK through our portfolio of popular products, and delivering efficiencies and cost savings in our supply chain8.

“We maintained our commitment to innovation with a number of new and exciting product launches which achieved listings and consumer impact early on, and are performing well.

“Despite these exciting developments we are, however, conscious of the longer-term context and potential impact of Brexit. That’s why we’re working closely with the wider food and farming industry, and with Government, to try and maximise opportunities of Brexit, whilst mitigating potential risks.

“In 2017, we will focus on implementing our UK Strategy 2020 and continue to champion British dairy to help generate greater returns for our farmer owners.”

NAM Implications:
  • Fine for the brands, but a 12% drop in revenue may need justification, even for farmers…
  • Competitor NAMs might benefit from a quick what if on possible disposal/s?