Arla Foods adjusts its revenue forecasts as consumers shift towards own-brand dairy amid economic strain.
- The company now predicts revenues between €13.2bn to €13.7bn, down from a possible €14.2bn.
- Rising production and declining consumer sales contribute to a dip in milk prices.
- UK market sees turnover growth despite a drop in branded product sales.
- Labour shortages and Brexit impacts pose challenges to future production.
Arla Foods has revised its revenue expectations for the year, projecting a range of €13.2bn to €13.7bn, compared to a prior target of up to €14.2bn. This adjustment comes as consumers increasingly favour supermarket own-brand milk products amidst the ongoing cost-of-living crisis.
The company is experiencing a decrease in milk prices, primarily as a result of increased production volumes and a reduction in consumer sales. Additionally, costs associated with ingredients, packaging, and energy have been notably high, affecting profitability.
In the UK, which is Arla’s most significant market with around 2,000 farmers, net turnover surged by 16.9% to reach £1.37bn, despite a noticeable decline in the sales of branded products. This includes measures such as reducing prices and package sizes for products like Lurpak to assist consumers during challenging financial times.
Two months earlier, Arla Foods highlighted potential further price increases and a looming ‘crisis in milk production’ if the UK government failed to address urgent labour shortages. A survey among Arla UK farmers indicated difficulties in recruitment post-Brexit, attributed to the end of free movement between Britain and the EU.
Chief Executive Peder Tuborgh noted, “We anticipate that inflation and its influence on consumer patterns will continue to mark the remaining part of 2023, putting pressure on branded volumes in most markets.” Arla has also implemented measures to enhance sustainability, such as replacing coloured milk bottle caps with clear tops to improve recycling rates.
Arla Foods navigates economic and operational challenges by adjusting strategies in response to market and regulatory pressures.
