Arla's master of blue Skyr thinking

When Peter Giørtz-Carlsen took over as boss of Arla’s UK operations last June he could see “signs on the horizon” of difficult times ahead in dairy but “didn’t think it would be that tough”.

A slump in global demand for dairy products, particularly from China, the Russian trade embargo, an end to European dairy quotas and soaring global milk supplies have since forced him into a sharp reassessment of the situation. 

Arla, too, has been caught up in the storm, particularly in the UK, where the co-op has had to cut head office jobs and improve efficiencies. And at group level, parent Arla Foods has just announced a 3.8% drop in overall revenues for the first six months of the year as a result of declining global milk prices.

But despite these challenges, Giørtz-Carlsen has big ambitions for Arla. Chief among them is turning Arla into one of the top 10 food brands in the UK by 2020. Having historically focused primarily on brands such as Anchor and Lurpak, the co-op has been putting increasing focus on its Arla masterbrand this year, rapidly expanding the range of Arla-branded products in the UK market by launching yoghurts and added-value lines such as Big Milk. 

This direction of travel should make Arla more resilient to volatility in the future, Giørtz-Carlsen believes. “If you look at the market as a triangle, with smaller niche products at the top, and own-label products at the bottom, we are well catered for,” he says. “But there is a big middle segment and I don’t think we have been good enough to date in developing it in terms of innovation.”

Indeed, Arla’s UK operations could learn a thing or two from its Scandinavian business, he suggests. “I think everyone in the industry will be interested in getting consumers to trade up, and maybe this is an area where we have been better in other markets,” he adds. 

Still, turning Arla into a top 10 food brand will be no easy feat. Cravendale, which is branded Arla Cravendale and therefore falls under the master brand, is currently the 56th biggest brand in UK fmcg; Arla itself doesn’t yet feature in the top 100 [The Grocer Biggest Brands Survey]. 

But while the quiet Scandinavian baulks at the idea of being one of the most powerful individuals in UK dairy, he is clear Arla’s strong market position, particularly in liquid milk and cheese, means it is well positioned to make the jump to ‘super brand’.

“We have spent a long time in the UK as a business, and over the past seven years have made great progress in establishing a strong platform,” he says, adding Arla has spent £500m during that period, including £150m on the co-op’s Aylesbury dairy.

The key priority now is to build on that investment and inject value through branding. Arla is already doing this through Cravendale and recently jumped into fortified milk with the launch of Big Milk, a premium milk for toddlers.

“I developed Skyr in Denmark before coming here and you will see more of these concepts across the business”

Peter Giørtz-Carlsen

“Own-label white milk currently has a market share of around 80%; we’d like to see that number come down a little, says Giørtz-Carlsen. “The question is whether we can introduce concepts that make sense from a consumer and customer point of view.”

One way for Arla to do this is by “meeting consumers where they are” by offering on-the-go products, and with the further development of products such as Big Milk. “We have been very happy with the launch, it has started a completely new category, and this could have global potential,” Giørtz-Carlsen claims. 

The Dane is equally effusive about the launch of Skyr, Arla’s Icelandic-style yoghurt. “I actually developed it in Denmark before coming over here and it was a big success, and you will see more of these concepts across the business,” he says.

Pan-European provenance

Arla got some flak on social media after it emerged Skyr (like other Arla yoghurts) is produced in Germany, but Giørtz-Carlsen is boldly European in his outlook. Everything Arla does, he says, “is about delivering the best possible milk price” for its 13,500 farmer members across Europe. “It’s our one KPI.” 

He therefore makes no excuses for the fact the co-op doesn’t have plans to bring production to the UK. “We have a very strong dairy over in Germany with capacity,” he says. “And of course we also export Arla products from the UK.”

This pan-European view of the business extends to farmer payments, with Giørtz-Carlsen insisting sharing milk payments across all of the co-op’s 13,500 members - brought into sharp focus by pledges by several major supermarkets to pay farmers extra for their milk - is the “Arla way”. “We all benefit from the different assets we bring to the party, we share the pain and the gain. People tend to forget we had an upturn and UK farmers benefited a lot. When I talk to our members they are pretty clear about this.”

Arla will unveil a radical new strategy during the autumn that will set out the co-op’s development over the next five years, including its plans to make the brand a top 10 food company in the UK. This, claims Giørtz-Carlsen, will see it launch more products, “and you will see an Arla that is much more visible, and taking more risks”. He admits there are difficult times ahead for Arla’s farmer owners, but he is confident the opportunities outweigh the challenges in the long run. “We have been here before, and we know the market will have to recover at some point.”