Global dairy giant Arla has boosted its bottom line through higher sales of branded goods despite the slump in milk prices hitting annual sales.

Overall revenues dropped 6.8% in 2016 to €9.6bn as a “direct result of lower sales prices in the global market due to high milk volumes in Europe in the first half of 2016”.

However, Arla said underlying conditions were improving and in the second half of the year it increased its prepaid milk price paid to farmers by “nearly 30%”.

It added that it expects both annual revenues and performance price to improve “significantly” in 2017 as higher dairy prices feed into the market

Despite this drop in headline revenues, group net profit increased by 20.7% to €356m as it shifted business to the more profitable branded retail and foodservice sales channels.

Strategic branded volume driven revenue growth was 5.2% during the year (revenues driven by volume increases and constant prices), with Arla up 4.5% and Lurpak up 7.7%.

The UK, Arla’s largest market, saw a reduction in revenues from €2.5bn to €2.2bn. But it reported brand growth across all categories in the country, with volume driven branded revenue growth of 7.6% compared to 5.2% in 2015.

Arla branded milk grew 12% in the UK in 2016, while Arla Lactofree was up 18% and Arla yoghurt sales more than doubled year-on-year. Lurpak was up 4.9% in the UK, but Anchor – which this month lost its last Cheddar listing in the mults – slipped 3% in a BSM category Arla described as “in structural decline”.

Tomas Pietrangeli, managing director, Arla Foods UK, said: “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 chain.”

Volume driven revenue growth in the EU was 1.3%. Arla’s strongest growth rates were in China and Southeast Asia, where its stated aim is to quadruple revenue from retail and foodservice by 2020.

“Our 2020 strategy has guided our business in 2016 as we sought to mitigate the impact of the extremely volatile market in Europe. We are more focused than ever on brand and category development as well as our geographic markets, and we succeeded in building our market shares in many of our strategic growth regions outside the EU,” said Arla CEO Peder Tuborgh.

“We are confident that the improved quality of our business as well as our Good Growth 2020 strategy put us in a favourable position and will ensure that we are ready to capture the full potential of the market as it continues to evolve and globalise in 2017,” he added.

Topics