Arla Foods returned to branded growth in the second half of 2023 after being impacted by inflationary pressures, declining dairy commodity prices, and the shift in consumer behaviour towards discounters and own-label products during the first half.
In the group’s UK business, revenue rose 2.4% for the whole of 2023 to £2.6bn. This follows 17.5% growth in 2022, which reflected the high inflation and elevated dairy prices at the time.
As inflation pressures eased, the group noted that consumers started returning to branded products in the second half of 2023.
In total, within the UK, branded volumes grew by 2.2%, with strong growth in its Arla Protein (+66.4%), Starbucks (+26.2%) and Arla Pro (+8.5%) ranges/
Bas Padberg, Managing Director of Arla Foods UK, commented: “As we saw in the first half of 2023, inflationary pressure continued to dominate, however, thanks to the strong execution by our farmer owners, employees and management, Arla has demonstrated its ability to adapt to challenging market conditions.
“As the UK’s largest dairy cooperative and supplier of some of the UKs best loved brands, it’s important that we ease pressures on cash-strapped shoppers when we can, as well as returning a fair price to our farmers so we can keep supermarket shelves full. Arla’s brand portfolio demonstrated its robustness in volatile conditions, and we made strong recovery in the second half of 2023 with a strategic branded volume growth.”
Across the total Arla Group, revenue came in at €13.7bn, roughly the same as its 2022 level. The cooperative noted that revenues were impacted by negative currency effects. Net profit was €380m with a 2.8% margin coming in at the bottom end of its target range of 2.8-3.2%.
Looking ahead, Arla said it expects the volatile market conditions, driven by external factors such as reduced consumer purchasing power, currency developments, and geopolitical tension and uncertainty, to continue to impact the business in 2024.
However, it expects the growth momentum experienced in the last half of 2023 to continue in the first half of this year, helping it return to branded volume growth for 2024 of 1.0-3.0%.
The group revenue outlook is €13.2-13.7bn, with the reduction primarily driven by reduced sales prices compared to the record highs in the beginning of 2023 and adverse currency effects. Net profit margin is set to be in the range of 2.8% to 3.2%.
