Inflation continues to pile pressure on dairy giant
Farmer-owned dairy cooperative, Arla Foods UK, has reported net revenues of £1.37bn in the first half of 2023, a growth of 16.9% compared to the same period in 2022.
In the same period, the Leeds-headquartered business achieved a net profit of £88.3m, or 1.5% of revenue compared to 3% in the same period last year.
Total Arla group revenue was £6bn for the first half of 2023, a 10.7% increase compared to £5.5bn in the first half of 2022, primarily driven by earlier implemented price increases in retail and foodservice.
Arla says the first half of 2023 was dominated by continued inflationary pressure, declining dairy commodity prices, and a shift in consumer behaviours towards discount channels and private label products.
Jonathan Dixon, senior vice president of sales at Arla Foods UK, said: “We have started to see our brand performance improve towards the end of the first half year due to significant investment in our brands and our continued innovation in the dairy aisle.
“This focus on growing our branded business in the short and long-term is already seeing positive growth for our Starbucks™ and Arla® Protein brands, and the improved performance across our brands is sustaining as we now have moved into the second half of the year.”
In volatile market conditions Arla’s foodservice business in the UK experienced negative volume growth of -1.8%, compared to 19% per cent growth in the first half of 2022, where the surge in demand was due to Covid-19 restrictions easing.
The business expects to see positive growth in its UK foodservice business in the second half of the year.
Arla Foods CEO, Peder Tuborgh, said: “As anticipated, the market conditions put our branded products under pressure.
“However, we managed to protect our relative market shares against our competitors, and I am pleased that we were able to secure group earnings, a competitive milk price and a half-year supplementary payment to our farmer owners of 1.0 EUR-cent/kg milk based on the half-year volumes as planned.
“We anticipate inflation and its influence on consumer patterns will continue to mark the remaining part of 2023, putting pressure on branded volumes in most markets.
“However, we expect an increase in the underlying category growth to contribute to branded growth slowly picking up again.”
Arla has lowered its full-year expectations for revenue to £11.3bn – £11.7bn and expects to deliver a profit within the range of 2.8 – 3% of revenue, narrowed from 2.8 – 3.2%.
