Milk buyer and processor Arla Foods UK saw 5% revenue growth in 2020, as the business reacted quickly to overcome market disruption related to Covid-19 control measures.
The UK arm of Danish co-operative Arla Foods amba generated revenues of £2.12 billion (€2.38bn) in the year ended December 31st 2020, compared to £1.95bn in the previous year. There was 13% revenue growth from Arla’s branded dairy products and 4% from own-brand volumes.
There was UK growth for Cravendale (23%) and Lactofree (11%) milks; and Anchor (9%) and Lurpak (15%) butters. UK butter manufacture reached record volumes, but increased Lurpak imports from Denmark were needed to meet the retail demand.
To meet this growth, Arla had to cease production or reduce volumes of some other products – for example, the Big Milk and Skyr Arla sub brands. Its Arla Pro food service brand also suffered from lockdowns, with a 6% fall in revenue. The sudden first lockdown saw Arla donate 838 tonnes of milk, butter and cheese to the FareShare network to avoid it being wasted.
Arla UK also notes that none of its 2,240 UK farmer suppliers were left without payment for their milk during the period of disruption.
“Our branded business increased when consumers turned to food products they trusted during lock down,” says Arla Foods UK managing director Ash Amirahmadi. “This was seen most significantly in branded butter when the nation searched for quality ingredients for baking. But it was the volume growth and the support of our retail customers that enabled us to flex our business and ensure the public had access to dairy when lockdown drove a significant increase in retail demand, particularly for own label milk and cheese.”
Mr Amirahmadi anticipates a “precariously balanced scale of challenge and optimism” for the Arla UK business in 2021. While the EU trade deal at the end of 2020 prevented significant disruption and financial loss for Arla Foods, the new ways of working and added supply chain complexity will add some cost, although it is still too soon to know the full impact.
Coronavirus uncertainty continues. Arla will support and protect its front line production and logistics teams working under difficult conditions – Arla’s 10 UK production sites all continued operations in 2020. The company will continue measures such as private site testing and full pay for colleagues isolating in 2021.
Arla UK is aware of rising farm costs following the poor 2020 harvest and very wet weather affecting the grass growing season. Kite Consulting has predicted a 6% increase in cost of production this year, a £285m rise across the sector.
Arla is committed to increasing the sustainability of its operations. It claims to already produce milk with around half the average emissions of milk made globally but is committed to reaching carbon net zero dairy production by 2050. This year will see the publication of Arla’s first Climate Check findings based on climate assessments on 95% of Arla farm to identify the best ways to reduce carbon emissions and increase beneficial environmental measures. “Ensuring farmers are receiving the best possible price for their milk will directly impact the extent of the efforts they can make on farm to continue producing the most sustainable milk possible,” notes the company.
Arla Foods amba – which operates in 153 countries – made an operating profit of €458 million on revenues of €10.6bn in 2020, compared to €406m and €10.53bn in 2019. Total assets at the year-end were €7.33bn (€7.11bn). Global sales of branded products were 7.7% higher but there was a 12% fall in sales to food service.