Arla raises guidance despite challenges of inflationary environment

A lorry driver for Arla Foods makes a milk delivery to a Tesco supermarket in London on August 3, 2021. (Photo by TOLGA AKMEN/AFP via Getty Images)

Dairy company Arla Foods UK has reported revenue growth of 3 per cent in the first half of 2021 with a net revenue of £1.1 billion.

Total Arla Group revenue increased slightly by 1.2 percent to €5.44bn (£4.66bn) in the first half of the year.

The farmer-owned cooperative has raised its guidance for full year revenue for 2021 to the range of €10.6-11 billion, despite expecting major challenges in the second half of the year due to the inflationary environment created by Covid-19, with higher prices on fuel, energy, packaging and feed leading to increased productions costs.

“The outlook remains volatile and whilst our recipe for managing Covid-19 has been successful, we must now manage the transition to the next normal just as well,” Peder Tuborgh, Arla Group chief executive said.

“We expect to see a re-balancing of demand between retail and foodservice which will bring our retail sales to a more familiar level and soften our branded growth and the broad inflationary environment will continue to challenge our company and farmer owners.”

In the UK, the company saw retail and e-commerce sales of its branded products continue to grow as people in Britain maintained a higher level of in-home consumption in the first part of the year.

Arla UK achieved an overall strategic branded revenue growth of 4.6 per cent compared to the first half of 2020, driven by popular brands like Arla Cravendale which grew 10 per cent, Arla Protein milk at 34 per cent, and Arla B.O.B. at 21 per cent. Across the full Arla brand range the total average growth was 13 per cent.

Ash Amirahmadi, managing director of Arla Foods UK said: “Demand for dairy has remained strong over the first half of 2021 as people continued to turn to our household Arla branded product range as they cooked and dined at home more. Whilst we do expect our brands to continue to perform well in the market, we will also see a different second half of the year with some retail demand being replaced by out-of-home consumption. ”

Arla UK’s foodservice business grew 21 per cent year on year as restaurants, canteens and pubs cautiously began to re-open in the spring. Arla’s stable of licensed brands also performed well, led by its ready-to-drink Starbucks portfolio which grew 42 per cent in volume in the UK.